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Cadillac Fairview is considering purchasing a bulldozer. The bulldozer will cost years. The asset will generate annual before-tax revenues of $80,000 over the next $100,000
Cadillac Fairview is considering purchasing a bulldozer. The bulldozer will cost years. The asset will generate annual before-tax revenues of $80,000 over the next $100,000 and will have an estimated salvage value of $30,000 at the end of sX six years. The asset is depreciated at a CCA rate of 30%. The marginal tax rate is 40%, and the firm's market interest rate is known to be 18%. All dollar figures represent constant dollars at time 0 and are responsive to the general inflation rate (a) With- 6%, compute the after-tax cash flows in actual dollars. (b) Determine the real rate of return of this project on an after-tax basis. (c) Suppose that the initial cost of the project w be financed through a local bank at an interest rate of 12%, with an annual payment of $24,323 over six years. With this additional condition, answer part (a) again
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