A corporation with a 27% combined income tax rate is considering the following investment in research equipment.

Year

Before-Tax Cash Flow

0

- 7500,000 $

1

650,000

2

950,000

3

2,750,000

4

1,900,000

5

800,000

6

450,000

Prepare a after-tax cash flow table assuming MACRS depreciation.

(a) What is the before-tax rate of return?

(b) What is the after-tax rate of return?