The Summit Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost is $430,000 and the asset will provide the following stream of earnings before depreciation and taxes for the next four years: Use Table 12-12 Year 1 Year 2 Year 3 Year 4 $200,000 245,000 84,000 76,000 The firm is in a 40 percent tax bracket and has a cost of capital of 12 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Calculate the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)
The Summit Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost is $430,000 and the asset will provide the following stream of earnings before depreciation and taxes for the next four years: Use Table 12-12 Year 1 Year 2 Year 3 Year 4 $200,000 245,000 84,000 76,000 The firm is in a 40 percent tax bracket and has a cost of capital of 12 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Calculate the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:The Summit Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost is $430,000 and
the asset will provide the following stream of earnings before depreciation and taxes for the next four years: Use Table 12-12
Year 1
Year 2
Year 3
Year 41
$200,000
245,000
84,000
76,000
The firm is in a 40 percent tax bracket and has a cost of capital of 12 percent. Use Appendix B for an approximate answer but calculate
your final answer using the formula and financial calculator methods.
a. Calculate the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations
and round your answer to 2 decimal places.).
Net present value
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