A special power tool for plastic products costs $400,000 snd has a 4 year useful life,...

A special power tool for plastic products costs

$400,000 snd has a 4 year useful life, no salvage value, and a 2 year before-tax payback period. Assume uniform annual end-of-year benefits.

a) Compute the before-tax rate of return

b) Compute the after-tax rate of return, based on MACRS depreciation and a 24% combined corporate income tax rate.

Expert Solution

jeff jeffy answered 1 year ago

A special power tool for plastic products costs $400,000 and has a 4-year useful life, no...

A special power tool for plastic products costs $400,000 and has a 4-year useful life, no salvage value, and a 2-year before-tax payback period. Assume uniform annual end-of-year benefits. (a) Compute the before-tax rate of return. (b) Compute the after-tax rate of return, based on MACRS depreciation and a 22.98% combined corporate income tax rate

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