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An investment of $600,000 is made in equipment that qualifies as 3-year equipment for MACRS-GDS depreciation. The before-tax cash flows, measured in constant dollars, for the investment consist of a uniform annual series of $200,000 plus a $200,000 salvage value at the end of the 5-year planning horizon. A 40% tax rate and 3% inflation rate apply. The real ATMARR is 10%.

a) Determine the after-tax cash flows, in constant dollars, for each year.

b) Determine the present worth for the investment.

c) Determine the real internal rate of return for the investment.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92869651

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