What is the before-tax rate of return

Reference no: EM13186425

Beasley World Industries purchases a new computing center for $100 million. They estimate a life of 5 years and a salvage value of $20 million. Beasley World Industries is allowed by the IRS to use Sum of Year's Digits depreciation. They also estimate revenue at $40 million a year.

a) What is the Before-Tax Rate of Return?

b) If they pay 50% income taxes, what is the After-Tax Rate of Return?

c) If their Before-Tax MARR is 30% and their After-Tax MARR is 17%, should they do this project? Why?

Reference no: EM13186425

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