CHAPTER 12: INCOME TAXES FOR CORPORATIONS 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 S6,000 salvage value. It is expected the tools will actually be kept in service for 6 years and then sold for $6,000. The before-tax benefit of owning the tools is as follows: 3. Year Before Tax Cash Flow S 40,000 $40,000 $45,000 S 45,000 s 15,000 $ 15,000 $6,000 selling price Compute the after-tax rate of return for this investment situation, assuming a 40% incremental tax rate. Hint: It can be set up as follows DDB Taxable Inc Inc Taxes ATCF BTCF o (100,000.00) Year $ (100,000.00) 140,000.00 $50,000.00 (10,000.00) S4,000.00 S 44 You need to complete the table and determine the IRR of the ATCF