What is the after-tax rate of return shellout

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Reference no: EM131810284

The Shellout Corp. owns a piece of petroleum drilling equipment that costs $100,000 and will be depreciated in 10 years by double declining balance depreciation, with conversion to straight-line depreciation at the optimal point. Assume no salvage value in the depreciation computation and a combined 34% tax rate. Shellout will lease the equipment to others and each year receive $30,000 in rent. At the end of 5 years, the firm will sell the equipment for $35,000. (Note that this is different from the zero-salvagevalue assumption used in computing the depreciation.) What is the after-tax rate of return Shellout will receive from this equipment investment?

Reference no: EM131810284

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