An investment of $1,400,000 is made in 5-year MACRS-GDS equipment. Measured in constant dollars, the investment yields annual returns of $400,000 and a salvage value of $500,000 at the end of the 7-year planninghorizon. A 25% tax rate and a 3% inflation rate apply. The real after-taxminimum attractive rate of return is 8%. For the investment, calculate a. After-tax present worth, b. After-tax annual worth measured in then-current dollars,c. Real internal rate of return, and d. EVA measured in then-current dollars.
An investment of $1,400,000 is made in 5-year MACRS-GDS equipment. Measured in constant dollars, the investment yields annual returns of $400,000 and a salvage value of $500,000 at the end of the 7-year planninghorizon. A 25% tax rate and a 3% inflation rate apply. The real after-taxminimum attractive rate of return is 8%. For the investment, calculate a. After-tax present worth, b. After-tax annual worth measured in then-current dollars,c. Real internal rate of return, and d. EVA measured in then-current dollars.
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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An investment of $1,400,000 is made in 5-year MACRS-GDS equipment. Measured in constant dollars, the investment yields annual returns of $400,000 and a salvage value of $500,000 at the end of the 7-year planning
horizon. A 25% tax rate and a 3% inflation rate apply. The real after-tax
minimum attractive
c. Real
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