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An automaker is buying some special tools for $100,000. The tools are being depreciated by double declining balance depreciation using a 4-year depreciable life and
An automaker is buying some special tools for $100,000. The tools are being depreciated by double declining balance depreciation using a 4-year depreciable life and a $6,250 salvage value. It is expected the tools will actually be kept in service for 6 years and then sold for $6,250. What is the after-tax rate of return for this investment, assuming a 30% tax rate? The before tax benefit of owning the tools is as follows: Year Before Tax Income (Cash Flow) 1 $30,000 2 $30,000 3 $35,000 $40,000 $10,000 $10,000 $6,250 Selling Price at year 6 + 5 a
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