The Summit Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost is $250,000 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 |
$ |
122,000 |
|
| Year 2 |
|
155,000 |
|
| Year 3 |
|
58,000 |
|
| Year 4 |
|
56,000 |
|
|
The firm is in a 30 percent tax bracket and has a cost of capital of 16 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
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.)