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A construction company plans to invest in new equipment to improve their productivity. The planned investment...

A construction company plans to invest in new equipment to improve their productivity. The planned investment is $500,000 now and $100,000 in year 1. The gross income for year 1 is $175,000, year 2 is $300,000, and year 3 is $600,000. Taxes related to the investment are $50,000 in year 1, $75,000 in year 2 and $100,000 in year 3.

Determine:

a) The before tax rate of return for the investment

b) The after-tax rate of return for the investment

c) How does the after-tax rate of return compare to the company’s MARR of 15%?

Please do not use excel

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Expert Solution

jeff jeffy answered 1 year ago
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