4. A firm purchased $120,000 worth of light general-purpose trucks. The operations of the trucks leadto annual income of $50,000 for years 1~4. Thesetrucks were then sold for $20,000 at the end ofyear 4. Assume a 36% combined tax rate. With a40% bonus depreciation plus MACRSdepreciation, do the following.a)Calculate the before-tax IRR.(b)Calculate the after-tax IRR.

IRR BEFORE TAX Cash Outflow = $120,000 Cash Inflow = $50000 (for first 3 years) In 4th year = $…

purpose trucks. The operations of the trucks le to annual income of $50,000 for years 1~4. Th trucks were then sold for $20,000 at the end o year 4. Assume a 36% combined tax rate. With 40% bonus depreciation plus MACRS depreciation, do the following. a) Calculate the before-tax IRR.

purpose trucks. The operations of the trucks le to annual income of $50,000 for years 1~4. Th trucks were then sold for $20,000 at the end o year 4. Assume a 36% combined tax rate. With 40% bonus depreciation plus MACRS depreciation, do the following. a) Calculate the before-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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Question

4. A firm purchased $120,000 worth of light general-
purpose trucks. The operations of the trucks lead
to annual income of $50,000 for years 1~4. These
trucks were then sold for $20,000 at the end of
year 4. Assume a 36% combined tax rate. With a
40% bonus depreciation plus MACRS
depreciation, do the following.
a)
Calculate the before-tax IRR.
(b)
Calculate the after-tax IRR.

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