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An asset is purchased for $5,000. The company has elected to apply a classic straight-line depreciation assuming no salvage value at the end of a
An asset is purchased for $5,000. The company has elected to apply a classic straight-line depreciation assuming no salvage value at the end of a 5-year life. Annual gross income is $6,000 and annual expenses plus upgrade expenses are $3,000. Both income and costs are expected to be affected by an inflation rate of 2%. The corporate combined federal and state rate is 40%. Capital gains are subject to a 28% tax rate. The asset is sold at the end of the 2nd year for $6,000. Complete the table below based on this information. For this same asset find the rate-of-return of the after tax cash flow in year zero dollars. Compare this to the company MARR. The company seeks a real MARR of 30% after taxes
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