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Staffing Virginia Tech football games (ticket & bag checkers, security, concessions, etc) costs approximately $99,000 each year. The university could invest in automatic body scanners
Staffing Virginia Tech football games (ticket & bag checkers, security, concessions, etc) costs approximately $99,000 each year. The university could invest in automatic body scanners and vending machines to cover gameday operations for $193,000 (note that the equipment has no MV after the 10-year life). If VT purchases this equipment, it will be depreciated using SL depreciation to a terminal BV of zero after 10 years. The equipment would still cost $72,000 per year for maintenance and operation. Virginia Tech has an effective income tax rate of 30% and expects that invested capital will earn at least 10% after income taxes are taken into account. Use the IRR method to determine if the equipment is a justifiable investment. If MACRS (seven-year recovery period) had been used in Part (a), would the after-tax IRR be lower or higher than your answer to Part (a)? The after-tax IRR under the SL method is %. (Round to one decimal place.) The gameday equipment a justifiable investment. The after-tax IRR under the MACRS method is %. (Round to one decimal place.) For this situation the after-tax IRR under the MACRS method is than under the SL method
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