An investment of $600,000 is made in equipment that qualifies as 3-year equipment for MACRS-GDS depreciation. The before-tax cash flows, measured in constant dollars, for the investment, consisting of a uniform annual series of $200,000 plus a $200,000 salvage value at the end of the 5-year planning horizon. A 40% tax rate and a 3% inflation rate apply. The real ATMARR is 10%.

a) Determine the after-tax cash flows, in constant dollars, for each year.

b) Determine the present worth for the investment.

c)Determine the real internal rate of return for the investment.

Answer rating: 100% (QA)

MARR 10 Tax 40 time 1 2 3 4 5 Investment 600000 Cashflows 200000 200000 ... View the full answer