-A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $26,100 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 40% and can depreciate the investment for tax purposes using the five-year MACRS tax depreciation schedule. Assume the opportunity cost of capital is 8%. Ignore inflation.

a.

Calculate project NPV for each company. (Negative amounts should be indicated by a minus sign.Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

NPV Company A. $ ? Company B. $ ?

b-1.

What is the IRR of the after-tax cash flows for each company? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

IRR Company A. % ? Company B. % ?

b-2.

What does comparison of the IRRs suggest is the effective corporate tax rate?(Do not round intermediate calculations. Round your answer to 1 decimal place.)

Effective tax rate % ?