Question: A special power tool for plastic products costs $400, has a 4-year useful life, no salvage value , and a 2-year before-tax payback period. Assume

A special power tool for plastic products costs $400, has a 4-year useful life, no salvage value, and a 2-year before-tax payback period. Assume uniform annual end-of-year benefits.

(a) Compute the before-tax rate of return.

(b) Compute the after-tax rate of return, based on MACRS depreciation and a 34% corporate income tax rate.

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