The Summit Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost is $400,000 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 $ 180,000
Year 2 236,000
Year 3 82,000
Year 4 74,000
The firm is in a 30 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.

Calculate the net present value.

Depreciation Year 3-Year MACRS 5-Year MACRS 7-Year MACRS 10-Year MACRS 15-Year MACRS 20-Year MACRS
1 0.333 0.2 0.143 0.1 0.05 0.038
2 0.445 0.32 0.245 0.18 0.095 0.072
3 0.148 0.192 0.175 0.144 0.086 0.067
4 0.074 0.115 0.125 0.115 0.077 0.062
5 0.115 0.089 0.092 0.069 0.057
6 0.058 0.089 0.074 0.062 0.053
7 0.089 0.066 0.059 0.045
8 0.045 0.066 0.059 0.045
9 0.065 0.059 0.045
10 0.065 0.059 0.045
11 0.033 0.059 0.045
12 0.059 0.045
13 0.059 0.045
14 0.059 0.045
15 0.059 0.045
16 0.03 0.045
17 0.045
18 0.045
19 0.045
20 0.045
21 0.017

appendix b is pv of $1 formula: PV = FV[1 / (1 + i)n]