A new municipal truck can be purchased for $90,000. Its expected useful life is six years, at which time the MV and BV will be zero. BTCF will be approximately $28,000 per year over the six-year useful life of the truck. Use SL depreciation, an effective income tax rate of 40%. What is the after-tax IRR
A new municipal truck can be purchased for $90,000. Its expected useful life is six years, at which time the MV and BV will be zero. BTCF will be approximately $28,000 per year over the six-year useful life of the truck. Use SL depreciation, an effective income tax rate of 40%. What is the after-tax IRR
Related questions
A box fabricator can either buy plastic straps for its Tufdutiâ crates at 6¢ each or install $700,000 worth of strapping equipment and manufacture the straps at their facility. Their technologist estimates the material, labor, and other costs would be 3¢ per strap.
(a) If 10 million straps per year are needed and the equipment is installed, what is the payback period?
Answer:
Reasoning/Work:
(b) The equipment would be depreciated by straight-line depreciation using a 5-year useful life and no salvage value. Assuming a combined 40% income tax rate, what is the after-tax payback period?
To assist you, fill in the table below and use the ATCF for years 1-5 to calculate the payback period.
| Year | BTCF | SL Depreciation | Taxable Income | Income Taxes@ 40% | ATCF |
| 0 | leave blank | leave blank | leave blank | ||
| 1-5 |
Answer:
Reasoning/Work:
c) Again, assuming a 5 yr SL depreciation w/ no salvage and a combined 40% income tax rate, what is the after-tax rate of return?
Answer:
Reasoning/Work:
