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6. Computing an Internal Rate of Return Dr. Whitten has decided to purchase equipment that has a cost of $60,000 and will produce a pretax
6. Computing an Internal Rate of Return Dr. Whitten has decided to purchase equipment that has a cost of $60,000 and will produce a pretax net cash inflow of $30,000 per year over its estimated useful life of six years. The equipment will have no salvage value and will be depreciated by the straight-line method. The tax rate is 50 percent. Determine Dr. Whitten's approximate after-tax internal rate of return. APPENDIX Present Value of an Annuity of $1.00 13-C 4% 6% 8% 10% Periods 2% 20% Periods 1 2 6 0.980 0.962 0.943 0.926 0.909 1.942 1.886 1.833 1.783 1.736 3 2884 2.775 2.673 2.577 2.487 4 3.808 3.630 3.465 3.312 3.170 5 4.713 4.452 4.212 3.993 3.791 5.601 5.242 4.917 4.623 4.355 6.472 6.002 5.582 5.206 4.868 7.325 6.733 6.210 5.747 5.335 8.162 7.435 6.802 6.247 5.759 10 8.983 8.111 7.360 6.710 6.145 15 12.849 11.118 9.712 8.560 7606 2016.351 13.590 11.470 9.818 8.514 25 19.523 15.622 12.783 10.675 9.077 12% 14% 16% 18% 0.893 0.877 0.862 0.848 0.833 1.690 1.647 1.605 1.566 1.528 2.402 2.322 2.246 2.174 2.107 3.037 2.914 2.798 2.690 2.589 3.605 3.433 3.274 3.127 2.991 4.111 3.889 3.685 3.498 3.326 4.564 4.288 4.039 3.812 3.605 4.968 4.639 4.344 4.078 3.837 5.328 4.946 4.607 4.303 4.031 5.650 5.216 4.833 4.494 4.193 6.811 6.142 5.576 5.092 4.676 7.469 6.623 5.929 5.353 4.870 7.843 6.873 6.097 5.467 4.948 8 9 1 2 3 4 5 6 7 8 9 10 15 20 25
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