Question
Consider the following investment opportunity: initial cost $850,000 annual revenues $500,000 annual operating costs exclusive of depreciation $200,000 expected life 20 years salvage value after
Consider the following investment opportunity:
initial cost $850,000
annual revenues $500,000
annual operating costs exclusive of depreciation $200,000
expected life 20 years
salvage value after taxes $40,000
annual depreciation for tax purposes $25,000
tax rate 34%
what is the rate of return on this investment? Assuming the investor wants to earn at least 12%, is this investment attractive?
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International Financial Management
Authors: Geert Bekaert, Robert Hodrick
3rd edition
1107111820, 110711182X, 978-1107111820
