A machine was purchased 4 years ago for 28000 its estimated, Ask an Expert

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A machine was purchased 4 years ago for $28,000. Its estimated life was 7 years with $0 salvage. Its market value today is $35,000. It is thought that its market value in 3 more years will be $12,000. 5 year MACRS depreciation is being used. BTCF last year was $26,000 and is fully inflation responsive. Inflation is expected to average 3.5% for each of the next 3 years. The tax rate is 40% on ordinary income and 20% on capital gains.

Calculate the prospective inflation free IRR (io) for this machine if it is kept for three more years. Please show your work.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92771029

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