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Compute the after-tax IRR under the SL method

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Question: An assembly operation at a software company currently requires $90,000 per year in labor costs. A robot can be purchased and installed to automate this operation, and the robot will cost $193,000 with no MV at the end of its 10-year life. The robot, if acquired, will be depreciated using SL depreciation to a terminal BV of zero after 10 years. Maintenance and operation expenses of the robot are estimated to be $60,000 per year. The company has an effective income tax rate of 40%. Invested capital must earn at least 7% after income taxes are taken into account.

a. The after-tax IRR under the SL method is___% (Round to one decimal place.)

b. The after-tax IRR under the MACRS method is___%.(Round to one decimal place.)

Reference no: EM131815917

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