Given the following information:

Nominal Initial Cost = $90,500; Nominal Before-tax Net Return = $7,000

Marginal Tax Rate = 20%; Required rate of return = 11%

Real Terminal Value = $110,500; Investment Life = 5 years

Suppose that IRS will allow the investor to depreciate the investment using straight-line over 12 years and the inflation rate is 5%.

(i) What is the nominal terminal value?

a. $116,205 b. $141,029

c. $148,452 d. $134,313

(ii) What is the annual depreciation expense?

a. $7,452 b. $7,919

c. $8,100 d. $7,905

(iii) What is the nominal after-tax terminal value?

a. $103,378 b. $123,382

c. $87,510 d. $82,958