Question
From After-Tax problems Section: 4. Some experimental lab equipment is being considered for purchase at $25,000. Prior to deducting by MACRS depreciation, the net benefits
From "After-Tax problems" Section:
4. Some experimental lab equipment is being considered for purchase at $25,000. Prior to deducting by MACRS depreciation, the net benefits from the equipment are expected to be $3000 at the end of the first year and increasing by $2000 per year after that until it is scrapped at the end of the seventh year for no salvage value. Assume seven percent inflation, a combined fed/state income tax rate of 35%, and a real after-tax MARR of 15%. What is the real after-tax rate of return of this potential equipment and should it be purchased?
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