What is real discount rate in percentage

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Q. Sanders Enterprises Inc has been considering purchase of a new manufacturing facility for 150,000. Facility is to be fully depreciated on a straight - line basis over seven years. Operating revenues from facility are expected to be $70,000 in nominal terms at end of first year. Revenues are expected to increase at inflation rate of 5%. Production cost at end of first year will be 20,000 in nominal terms also they are expected to increase by 6% per year. Real discount rate is 8 percent. Corporation tax rate is 34%. Sanders have or ongoing profitable operation. Should company accept?

Reference no: EM1379884

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