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A large corporation is considering adding some automatic equipment to its production facilities. An investment of $120,000 will produce an annual benefit of $25,000. If
A large corporation is considering adding some automatic equipment to its production facilities. An investment of $120,000 will produce an annual benefit of $25,000. If the firm uses sum-of-years-digits, an 8-year useful, and $12,000 salvage value, what is the rate of return for this investment after taxes? Assume a 40% income tax rate for this corporation.
Hint: The annual rate of return is between 8% and 10%.
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