Electronic Games is moving very quickly to introduce a new interrelated set of video games. The...
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Electronic Games is moving very quickly to introduce a new interrelated set of video games. The initial investment for equipment to produce the necessary electronic components is $9 million. The salvage value after 6 years is $700,000. Anticipated net production savings are $6 million the first year, decreasing by $1 million each year for 6 years, with all dollar amounts expressed in actual dollars. Depreciation follows MACRS 5-year property, taxes are 40% , the actual after-tax MARR is 22.72%, and inflation is 4%. Determine Real after-tax cash flows for each year Electronic Games is moving very quickly to introduce a new interrelated set of video games. The initial investment for equipment to produce the necessary electronic components is $9 million. The salvage value after 6 years is $700,000. Anticipated net production savings are $6 million the first year, decreasing by $1 million each year for 6 years, with all dollar amounts expressed in actual dollars. Depreciation follows MACRS 5-year property, taxes are 40% , the actual after-tax MARR is 22.72%, and inflation is 4%. Determine Real after-tax cash flows for each year
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Answer rating: 100% (QA)
SOLUTION To calculate the real aftertax cash flows for each year we need to account for depreciation taxes inflation and the aftertax MARR First lets calculate the depreciation using the Modified Acce... View the full answer
Related Book For
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
Posted Date:
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