A firm has invested $30000 in equipment with a 5- year useful life. The machinery will have no salvage value. The annual benefits from the machinery are $7000 for the first year and increase by $1000 per year. Assume a combined 40% income tax rate, and the firm uses the straight-line depreciation. (a) ) Compute the before-tax IRR. (b) 5) Compute the after-tax IRR.

A firm has invested $30000 in equipment with a 5- year useful life. The machinery will have no salvage value. The annual benefits from the machinery are $7000 for the first year and increase by $1000 per year. Assume a combined 40% income tax rate, and the firm uses the straight-line depreciation. (a) ) Compute the before-tax IRR. (b) 5) Compute the after-tax IRR.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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