In a bio-based material recycling company, the operation mangers are considering a twin-screw extruder with a price of 12,000 ÕMR and another 2,000 OMR will be spent for shipping and installation of the extruder. The estimated net income generated from this machine is 3,500 OMR per year. The extruder will be used for 5 years, and then it will be sold for an estimated market value of 2,500 OMR. The extruder MARCS property class is 5 years. If the effective income tax rate (t) is 40% and the after-tax MARR is 10%. a) What is the after-tax IRR for this project? (use trial and error procedure and GDS) b) Should this extruder be purchased by the company?

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
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In a bio-based material recycling company, the operation mangers are considering a twin-screw
extruder with a price of 12,000 OMR and another 2,000 OMR will be spent for shipping and
installation of the extruder. The estimated net income generated from this machine is 3,500
OMR per year. The extruder will be used for 5 years, and then it will be sold for an estimated
market value of 2,500 OMR. The extruder MARCS property class is 5 years. If the effective
income tax rate (t) is 40% and the after-tax MARR is 10%.
a) What is the after-tax IRR for this project? (use trial and error procedure and GDS)
b) Should this extruder be purchased by the company?
Transcribed Image Text:In a bio-based material recycling company, the operation mangers are considering a twin-screw extruder with a price of 12,000 OMR and another 2,000 OMR will be spent for shipping and installation of the extruder. The estimated net income generated from this machine is 3,500 OMR per year. The extruder will be used for 5 years, and then it will be sold for an estimated market value of 2,500 OMR. The extruder MARCS property class is 5 years. If the effective income tax rate (t) is 40% and the after-tax MARR is 10%. a) What is the after-tax IRR for this project? (use trial and error procedure and GDS) b) Should this extruder be purchased by the company?
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