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Consider two mutually exclusive alternatives stated in Year-0 dollars. Both alternatives have a 3-year life with no salvage value. Assume the annual inflation rate is 5%, a combined income tax rate of 38% and straight-line depreciation. The minimum attractive after-tax rate of return (MARR) is 8%. Use rate of return analysis to determine which alternative is preferable. You are required to write the rate of return for the increment A – B as a percentage Year A B 0 -$420 -$300 1 200 150 2 200 150 3 200 150.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92825289

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