a ) Terex, a large road construction firm that operates in three provinces , is considering the purchase of ten newly designed , heavy- duty road graders to replace its current fleet . One of the advantages of these new road graders is their increased stability , which Terex believes will cut in half the frequency with which graders roll over , injuring or killing operators . Such injuries and fatalities have proved a significant loss exposure for Terex . Additional advantages of these new graders are that they are more fuel - efficient and productive than the graders Terex is now using. The new graders , which Terex can purchase for $ 40,000 each , can be expected to have a useful life of seven years , with no salvage value . If Terex management wishes to earn an annual after tax , time adjusted rate of return of at least 16% on its funds , compute the minimum after -tax cash flow that each grader would have to generate to attain this rate of return . ( For 16% , 7 years , the present value factor is 4 . 039)