Expected after-tax rate of return

Assignment Help Operation Management

Reference no: EM131012577

JET FAB bought a CNC laser cutting machine at a cost of $400,000 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 39%, and the company expects to have an after -tax rate of return of 10% in all its investments. The laser cutting machine generated an annual income of $80,000 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 ended up selling the CNC laser cutting machine for $150,000. Determine if the company obtained the expected after-tax rate of return on this equipment.

Reference no: EM131012577

Questions Cloud

Determine the maximum permitted load : A prefabricated wood I is simply supported, spans 12 ft. and is constructed as shown. The beam is to carry a concentrated load at the center. If the allowable shear stress is the glue 80 psi, the allowable shear stress in the wood is 110 psi, and..

Use ihospitals rule then find the given limit : Find the limit. Use I'Hospital's Rule if appropriate. If there is a more elementary method, consider using it. limx→∞ (1 + a/x)bx.

Depletion charges using the percentage depletion : Determine the depletion charges using the percentage depletion method for the first year only for a coal mine. The applicable rate for the percentage depletion method is 10%.

Would this information potentially change : Now let's say the returns of opportunities A and B are highly correlated with the market as a whole but those of opportunity C have a very low correlation with the overall market. Would this information potentially change the required return you i..

Expected after-tax rate of return : Consequently, the company ended up selling the CNC laser cutting machine for $150,000. Determine if the company obtained the expected after-tax rate of return on this equipment.

Plot the pressure versus void ratio curve on a semilog graph : The pressure versus void ratio data determined from a consolidation test on an undisturbed clay specimen are as follows:- Plot the pressure versus void ratio curve on a semilog graph.

Calculate the weighted average cost of capital : Please calculate the weighted average cost of capital. price = Dividerd next y / (cost of Equity Cost of Equity = Dividerd next y / price + GR

Number of years that the loan is in effect : Find the total interest paid on the loan in part Use M = Lrk / 12(k - 1), where k = [1 + (r/12)] ^12t, M is the monthly payment, L is the loan amount, r is the intrest rate, and t is the number of years that the loan is in effect.

What will the store of the future look like : What will the store of the future look like? What will be the impact on the traditional "bricks and mortar" store that we can visit, walk in, peruse the product, purchase, and walk back out to our car with our purchase in-hand

User Account

All Pages