Determine the expected after-tax rate of return on this

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please show all minor steps please. and explicit equations.

JET FAB bought a CNC laser cutting machine at a cost of $750,000 to meet the specific needs of customer that had given a 4-year contract with the possibility of extending the contract for another 4 years.

The company uses the MACRS depreciation method for this equipment as a 7-year property for tax purposes.

The income tax rate for the company is 42%, and the company expects to have an after-tax rate of return of 8% in all its investments. The laser cutting machine generated an annual income of $250,000 for the first four years.

The customer decided not to renew the contract after 4 years due to circumstances beyond its control.

Consequently, the company obtained ended up selling the CNC laser cutting machine for $220,000. Determine the expected after-tax rate of return on this equipment.

Reference no: EM131959795

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