A firm has invested $400,000 in car-washing equip- ment. They will depreciate the equipment by 60%...
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A firm has invested $400,000 in car-washing equip- ment. They will depreciate the equipment by 60% bonus depreciation with the balance using 5-year MACRS, assuming a $50,000 salvage value at the end of the 5-year useful life. The firm is expected to have a before-tax cash flow, after meeting all expenses of operation (except depreciation), of $165,000 per year. The firm's combined corporate tax rate is 28%. (a) If the projected income is correct, and the equip- ment can be sold for $100,000 at the end of 5 years, what after-tax rate of return would the corporation receive from this venture? A firm has invested $400,000 in car-washing equip- ment. They will depreciate the equipment by 60% bonus depreciation with the balance using 5-year MACRS, assuming a $50,000 salvage value at the end of the 5-year useful life. The firm is expected to have a before-tax cash flow, after meeting all expenses of operation (except depreciation), of $165,000 per year. The firm's combined corporate tax rate is 28%. (a) If the projected income is correct, and the equip- ment can be sold for $100,000 at the end of 5 years, what after-tax rate of return would the corporation receive from this venture?
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Answer rating: 100% (QA)
Year Income 9come After tax 1 165000 48333 193332 289978 ... View the full answer
Related Book For
Engineering Economic Analysis
ISBN: 9780195168075
9th Edition
Authors: Donald Newnan, Ted Eschanbach, Jerome Lavelle
Posted Date:
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