Question
Jason has made up his mind he wants a pool in the family's backyard. He figures his kids and spouse will be thrilled. However, to
Jason has made up his mind he wants a pool in the family's backyard. He figures his kids and spouse will be thrilled. However, to cover the cost of the pool, they'll have to pack up and live away from home for few weeks during the summer to rent their home to vacations. He crunched the numbers based on the following estimates.
- Cost of pool/installation = $52,822
- Life of the pool (no salvage value) = 20 years
- Annual net cash inflows from renting (net of cash expenses for renting and pool maintenance) = $7,700
- Tax rate = 26%
- Average rate of return = 9%
Jason's daughter, Sarah found the above information written on a sheet of paper in his office, along with the following notes.
Determine the simple payback period using (1) before tax dollars and (2) after tax dollars
Please help me to calculate after tax dollars. I got 9.27 but this is incorrect.
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