Question
In: Accounting
"A firm is considering purchasing a computer system. -Cost of system is $188,000. The firm will...
"A firm is considering purchasing a computer system.
-Cost of system is $188,000. The firm will pay for the computer
system in year 0.
-Project life: 4 years
-Salvage value in year 0 (constant) dollars: $24,000
-Depreciation method: five-years MACRS
-Marginal income-tax rate = 40% (remains constant over time)
-Annual revenue = $141,000 (year-0 constant dollars)
-Annual expenses (not including depreciation) = $75,000 (year-0
constant dollars)
If the general inflation rate is 2.1% during the project period
(which will affect all revenues, expenses, and the salvage value
but not depreciation), determine the INFLATION-FREE IRR' of the
computer system. Enter your answer as a percentage between 0 and
100."
Solutions
ekkarill92 answered 1 year agoRelated Solutions
"A firm is considering purchasing a computer system. -Cost of system is $188,000. The firm will...
"A firm is considering purchasing a computer system.
-Cost of system is $188,000. The firm will pay for the computer
system in year 0.
-Project life: 4 years
-Salvage value in year 0 (constant) dollars: $24,000
-Depreciation method: five-years MACRS
-Marginal income-tax rate = 40% (remains constant over time)
-Annual revenue = $141,000 (year-0 constant dollars)
-Annual expenses (not including depreciation) = $75,000 (year-0
constant dollars)
If the general inflation rate is 2.1% during the project period
(which will affect...
"A firm is considering purchasing a computer system. -Cost of system is $191,000. The firm will...
"A firm is considering purchasing a computer system.
-Cost of system is $191,000. The firm will pay for the computer
system in year 0.
-Project life: 5 years
-Salvage value in year 0 (constant) dollars: $13,000
-Depreciation method: five-years MACRS
-Marginal income-tax rate = 37% (remains constant over time)
-Annual revenue = $146,000 (year-0 constant dollars)
-Annual expenses (not including depreciation) = $77,000 (year-0
constant dollars) If the general inflation rate is 3.7% during the
project period (which will affect...
"A firm is considering purchasing a computer system. -Cost of system is $128,000. The firm will...
"A firm is considering purchasing a computer system.
-Cost of system is $128,000. The firm will pay for the computer
system in year 0.
-Project life: 5 years
-Salvage value in year 0 (constant) dollars: $12,000
-Depreciation method: five-years MACRS
-Marginal income-tax rate = 37% (remains constant over time)
-Annual revenue = $128,000 (year-0 constant dollars)
-Annual expenses (not including depreciation) = $94,000 (year-0
constant dollars)
If the general inflation rate is 2.6% during the project period
(which will affect...
"A firm is considering purchasing a computer system. -Cost of system is $199,000. The firm will...
"A firm is considering purchasing a computer system. -Cost of
system is $199,000. The firm will pay for the computer system in
year 0. -Project life: 5 years -Salvage value in year 0 (constant)
dollars: $17,000 -Depreciation method: five-years MACRS -Marginal
income-tax rate = 40% (remains constant over time) -Annual revenue
= $144,000 (year-0 constant dollars) -Annual expenses (not
including depreciation) = $91,000 (year-0 constant dollars) If the
general inflation rate is 4.1% during the project period (which
will affect...
"A firm is considering purchasing a computer system. -Cost of system is $112,000. The firm will...
"A firm is considering purchasing a computer system.
-Cost of system is $112,000. The firm will pay for the computer
system in year 0.
-Project life: 5 years
-Salvage value in year 0 (constant) dollars: $23,000
-Depreciation method: five-years MACRS
-Marginal income-tax rate = 37% (remains constant over time)
-Annual revenue = $127,000 (year-0 constant dollars)
-Annual expenses (not including depreciation) = $96,000 (year-0
constant dollars)
-The general inflation rate is 3.6% during the project period
(which will affect all...
"A firm is considering purchasing a computer system. -Cost of system is $176,000. The firm will...
"A firm is considering purchasing a computer system.
-Cost of system is $176,000. The firm will pay for the computer
system in year 0.
-Project life: 6 years
-Salvage value in year 0 (constant) dollars: $17,000
-Depreciation method: five-years MACRS
-Marginal income-tax rate = 37% (remains constant over time)
-Annual revenue = $121,000 (year-0 constant dollars)
-Annual expenses (not including depreciation) = $85,000 (year-0
constant dollars)
-The general inflation rate is 2.8% during the project period
(which will affect all...
"A firm is considering purchasing a computer system. -Cost of system is $198,000. The firm will...
"A firm is considering purchasing a computer system.
-Cost of system is $198,000. The firm will pay for the computer
system in year 0.
-Project life: 5 years
-Salvage value in year 0 (constant) dollars: $10,000
-Depreciation method: five-years MACRS
-Marginal income-tax rate = 40% (remains constant over time)
-Annual revenue = $147,000 (year-0 constant dollars)
-Annual expenses (not including depreciation) = $88,000 (year-0
constant dollars)
-The general inflation rate is 4.9% during the project period
(which will affect all...
"A firm is considering purchasing a computer system. -Cost of system is $198,000. The firm will...
"A firm is considering purchasing a computer system.
-Cost of system is $198,000. The firm will pay for the computer
system in year 0.
-Project life: 5 years
-Salvage value in year 0 (constant) dollars: $10,000
-Depreciation method: five-years MACRS
-Marginal income-tax rate = 40% (remains constant over time)
-Annual revenue = $147,000 (year-0 constant dollars)
-Annual expenses (not including depreciation) = $88,000 (year-0
constant dollars)
-The general inflation rate is 4.9% during the project period
(which will affect all...
"A firm is considering purchasing a computer system. -Cost of system is $198,000. The firm will...
"A firm is considering purchasing a computer system.
-Cost of system is $198,000. The firm will pay for the computer
system in year 0.
-Project life: 5 years
-Salvage value in year 0 (constant) dollars: $10,000
-Depreciation method: five-years MACRS
-Marginal income-tax rate = 40% (remains constant over time)
-Annual revenue = $147,000 (year-0 constant dollars)
-Annual expenses (not including depreciation) = $88,000 (year-0
constant dollars)
-The general inflation rate is 4.9% during the project period
(which will affect all...
"A firm is considering purchasing a computer system. -Cost of system is $198,000. The firm will...
"A firm is considering purchasing a computer system.
-Cost of system is $198,000. The firm will pay for the computer
system in year 0.
-Project life: 5 years
-Salvage value in year 0 (constant) dollars: $10,000
-Depreciation method: five-years MACRS
-Marginal income-tax rate = 40% (remains constant over time)
-Annual revenue = $147,000 (year-0 constant dollars)
-Annual expenses (not including depreciation) = $88,000 (year-0
constant dollars)
-The general inflation rate is 4.9% during the project period
(which will affect all...
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