A surface mount placement machine is purchased for $500,000. The SMP machine qualifies as 5-year equipement for MACRS-GDS depreciation. The before tax cash flows, in contant dollars, include an annual uniform series of $120,000 plus $100,000 salvage value at the end of the 4-year planning horizon. A 40% tax rate applies. Inflation is 3%/yr. The real ATMARR is 8%.

A. Determine the after-tax cash flows, in constant dollars, for each year.

B. Determine the present worth for the investment.

C. Determine the real internal rate of return for the investment.

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