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# Universal Electronics is considering the purchase of manufacturing equipment with

Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR). Carefully refer to Table 12-11 to determine in what 225 rs then \$37,000 a year for seven more years. The firm has a tax rate of 34 percent. Assume the cost of capital is 14 percent.

In doing your analysis, if you have years in which there is no depreciation, merely enter a zero for depreciation. Use Table 12-12. 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. (

Do not round intermediate calculations and round your answer to 2 decimal places.) Net present value 12,931.36 5-Year Depreciation Year 3-Year 7-Year 10-Year 15-Year 20-Year MACRS MACRS MACRS MACRS MACRS MACRS 0.100 1 0.333 0.200 0.143 0.050 0.038 0.180 0.320 0.245 2 0.445 0.095 0.072 0.192 3 0.148 0.175 0.144 0.086 0.067 4 0.115 0.115 0.077 0.062 0.074 0.125 0.057 5 0.115 0.089 0.092 0.069 6 0.058 0.062 0.053 0.089 0.074 0.089 0.066 0.059 0.045 0.045 0.066 0.059 0.045 0.065 9 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 0.045 14 0.059 15 0.059 0.045 16..... 0.045 0.030 17 0.045 18..... 0.045 19.. 0.045 20... 0.045 21 0.017 1.000 1.000 1.000 1.000 1.000 1.000 N LO CC CO

Table 12-11 Categories for depreciation write-off Class 3-year MACRS All property with ADR midpoints of four years or less. Autos and light trucks are excluded from this category. 5-year MACRS Property with ADR midpoints of more than 4, but less than 10 years. Key assets in this category include automobiles, light trucks, and techno- logical equipment such as computers and research-related properties. Property with ADR midpoints of 10 years or more, but less than 16 years. Most types of manufacturing equipment would fall into this category, as would office furniture and fixtures. 7-year MACRS 10-year MACRS Property with ADR midpoints of 16 years or more, but less than 20 years. Petroleum refining products, railroad tank cars, and manufactured homes fall into this group. 15-year MACRS Property with ADR midpoints of 20 years or more, but less than 25 years. Land improvement, pipeline distribution, telephone distribution, and sewage treatment plants all belong in this category. 20-year MACRS Property with ADR midpoints of 25 years or more (with the exception of real estate, which is treated separately). Key investments in this cat- egory include electric and gas utility property and sewer pipes. 27.5-year MACRS Residential rental property if 80% or more of the gross rental income is from nontransient dwelling units (e.g., an apartment building); low- income housing.

31.5-year MACRS Nonresidential real property that has no ADR class life or whose class life is 27.5 years or more. 39-year MACRS Nonresidential real property placed in service after May 12, 1993. 1 PV-FV Appendix B Present value of \$1, PV 1+i Percent 9 % 10 % Period 1% 2% 3% 4% 5% 6% 7% 11% 12% 0.883 1 0.990 0.980 0.971 0.962 0.852 0943 0.835 0.926 0.917 0.909 0901 2.. 0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0812 0.797 0.971 0.942 0.915 Q.889 Q.864 0.840 0816 0.794 0.772 0.751 07a1 0712 0.961 0.924 0.888 0855 0.823 0.792 0.763 0.735 0.708 0.683 0636 0.650 0.951 0906 0.863 0.822 0.784 0747 0713 0.681 0.621 0583 0567 0507 0.942 0.888 0837 0790 0.746 0.705 0666 0.630 0.596 0.564 0.535 0.4821 0.933 0.871 0813 0.760 0.711 0.805 0.623 0.583 0.547 0.513 0.452 0.923 0.853 0.789 0.731 0.677 0.627 0582 0540 0.502 0467 0434 0404 0.381 0.914 0.837 0,766 0.703 0.645 0.592 0544 0.500 0.460 0.424 0.39 0.352 0.905 0.820 0.744 0.676 0614 0.558 0508 0.463 0.422 0.38 0.322 1. 0.806 0.804 0.722 0660 0.585 0.527 0475 0429 0.38 0.350 0317 0287 0.788 0.497 12 0.887 0701 0625 0.557 0444 0397 0.356 0.319 0286 0257 13... Q.879 0.773 0.681 0.601 0.530 0415 0368 0326 0.290 0258 0229 0.489 0.505 0299 0.577 14 Q.870 0.758 0.001 0442 0.38 0340 0.203 0.232 0205 0.209 0.743 15 0.861 0.642 0565 0481 0.417 0362 0.315 0275 0.239 0183 0458 0.163 16 0.853 0728 0.623 0534 0.394 0.339 0292 0.252 0.218 0.188 0.844 0.714 0.805 0.513 0.436 0.371 0317 0270 0231 0.19 0.170 0.148 1P 0.836 0.700 0.557 0.494 0.416 0.350 0.29 0.200 0.212 0.180 0.153 0130 19 0.164 0.828 0.686 0.570 0.475 0.396 0.331 0277 0.232 0.194 0.138 0118 20 0.820 0.673 0.554 0.466 0.377 0.312 0258 0215 0.178 p.149 0.124 a.104 26 0.780 0.610 0.478 0.375 0.295 0.233 0.184 0.146 0.116 0.092 p074 o.069 0308 30 0742 0.552 0.412 0.231 0.174 0.131 0.099 0.075 0.057 0044 0.c33 0011 40 0.672 0.453 0.307 0200 0.142 0,097 0,067 0046 0.032 0,022 0015 0.013 0.808 0.372 0.228 0.141 0.08/ 0.054 0.034 0.021 0.009 0.006

14 0.783 0.769 0756 0.743 0.731 0.718 0706 0.694 0.640 0.592 0549 0.510 0.444 0,093 0.67b 0.668 0.641 0.624 0.809 0583 0.5/9 0.512 0.456 0406 0.364 0.296 0.350 0.613 0.52 0572 0.552 0.534 0.515 0499 0.482 0.410 0.301 0.260 0.198 0.543 0.519 0.497 0.476 0.456 0437 0419 0402 0.328 0.269 0223 0.186 0.132 0,480 0.456 0432 0.410 0.390 0.370 0.352 0.335 0.262 0.207 0.165 0.133 0.088 0.378 0.279 0.159 0.095 0.05e 0.425 0.400 0.354 0.333 0.314 0296 0.210 0.122 0.068 0.376 0.351 0.327 0.305 0.285 0.266 0249 0.233 0.168 0.123 0.091 0.039 0.333 0.308 0284 0.263 0.243 0.225 0200 0.194 0.134 0.094 0.067 0.048 0.026 0.035 10 0.295 0.270 0247 0.227 0.205 0.191 0.176 0.162 0.107 0.073 0.050 0.017 0.261 0.237 0215 0.195 0.178 0.162 0.148 0.135 0.086 0.056 0.0S7 0.025 0012 12 0,231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.069 0043 0.027 0.018 0.008 0.093 0.033 12 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0,05 0.0g0 0,013 0.005 14 0.181 0.160 0.141 0.125 0.111 0.099 0.068 o.pre D044 0.025 0.015 Q.009 p.o03 0.020 0.006 0.160 0.140 0.123 0.108 D.095 0.084 0.074 0.D65 0.035 0.011 0.002 0.005 0.0030 16 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.028 0015 0.006 0.002 0.062 0012 0.125 0.108 0.083 0.080 0,069 0,080 0.045 0.023 0.006 0.001 0.001 0.111 0.090 0.081 0.069 0.059 0.051 0044 0.038 0.015 0.009 0.00 0.002 0,002 0,098 0.083 0070 0.080 0,051 0.043 0,037 0.031 0.014 0.007 0.000 0.002 0.051 0.037 20 0,087 0.073 0.061 0.0430 Q031 0.026 0.012 0.005 0.001 0.013 0.010 D.047 0.038 0.030 0.024 p.020 0.016 0.004 0.001 0.001 30 0.026 0.020 0.015 0.012 0.00P 0.007 0.006 0.004 0.001 0 0,008 0.005 0.004 0.003 0.002 0.001 0.001 0.001 0.001 0,002 0.001 Q001

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