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The Yonsei Development Inc. plans to buy a 3D printing robot for construction of large-scale structurers. The price of the robot is $100,000 and its
The Yonsei Development Inc. plans to buy a 3D printing robot for construction of large-scale structurers. The price of the robot is $100,000 and its salvage value is $20,000 at the end of six years. The robot will generate annual before-tax revenues of $75,000 over the next six years. The robot belongs to a five-year MACRS property. All dollar figures are shown in constant dollars at time 0 and they are responsive to the general inflation rate f. Assuming 35% for the marginal tax rate and 15% for the firm's market interest rate, solve the following questions: 1. With f= 5%, calculate the after-tax cash flows in actual dollars. 2. What is the real rate of return on an after-tax basis? 3. Assuming that the cost of the robot will be financed with 12% interest and $24,323 annual payment of over six years, redo part (1). 4. In part (1), what is the amount of present-value loss due to inflation? 5. In part (1), how much does the robot have to generate in additional before-tax annual revenue in actual dollars to make up the loss due to inflation
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