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Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost...

Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $500,000. If the equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years. Use Table 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Earnings before Depreciation
Year 1 $ 160,000
Year 2 215,000
Year 3 125,000
Year 4 89,000
Year 5 78,000
Year 6 44,000


The firm is in a 25 percent tax bracket and has a 12 percent cost of capital.


a. Calculate the net present value.

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