An investor bought a racehorse for $14 M. The horses average winnings were $5,300,000 per year and expenses averaged $500,000 per year.
The horse was retired after 2 years, at which time it was sold to a breeder for $9,500,000. Assuming 3 year MACRS life for a racehorse and
an income tax rate of 39%, determine the investors after-tax rate of return on this investment.
A. The before-tax cash flow for the first two years.
B. The book value at the end of the second year.
							Total