Estimate the approximate after-tax rate of return for a project that has a first cost of $500,000,

Question:

Estimate the approximate after-tax rate of return for a project that has a first cost of $500,000, a salvage value of 20% of the first cost after 3 years, and annual gross income less operating expenses of (GI–OE) = $230,000. Assume the company has a 35% effective tax rate.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...