a. The present worth of the investment is $ . (Round to the nearest dollar.) b. The after-tax internal rate of return is%. (Round to one decimal place.) c. This vehicle a smart investment because the PW is and the IRR is than the MARR.
a. The present worth of the investment is $ . (Round to the nearest dollar.) b. The after-tax internal rate of return is%. (Round to one decimal place.) c. This vehicle a smart investment because the PW is and the IRR is than the MARR.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A new municipal refuse collection vehicle can be purchased for $84,000. Its expected useful life is six years, at which time the market value and book value will be zero. Before-tax cash flow (BTCF)
will be + $18,000 per year over the six-year life of the vehicle.
a. Use straight-line depreciation, an effective income tax rate of 40% and an after-tax MARR of 12% to determine the present worth of the investment.
b. What is the after-tax internal rate of return?
c. Is this vehicle a sound investment? Explain your answer.
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year.
a. The present worth of the investment is $. (Round to the nearest dollar.)
b. The after-tax internal rate of return is%. (Round to one decimal place.)
c. This vehicle
a smart investment because the PW is
and the IRR is
C
than the MARR.
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