Compute the after-tax rate of return

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Reference no: EM131810280

An automaker is buying some special tools for $100,000. The tools are being depreciated by double declining balance depreciation using a 4-year depreciable life and a $6250 salvage value. It is expected the tools will actually be kept in service for 6 years and then sold for $6250. The before-tax benefit of owning the tools is as follows:

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Compute the after-tax rate of return for this investment situation, assuming a 46% incremental tax rate.

Reference no: EM131810280

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