(Solution) IE242 HOMEWORK 4 A Group Of Businessmen Formed A Corporation To Lease A Piece Of Land For 5 Years At The Intersection Of Two Busy Streets. The... | Snapessays.com


(Solution) IE242 HOMEWORK 4 A group of businessmen formed a corporation to lease a piece of land for 5 years at the intersection of two busy streets. The...


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IE242

 

HOMEWORK 4

 

A group of businessmen formed a corporation to lease a piece of land for 5 years at the

 

intersection of two busy streets. The corporation has invested $50,000 in car washing

 

equipment. They will depreciate the equipment by sum-of-years digits depreciation

 

assuming a $5000 salvage value at the end of the five-year useful life. The corporation is

 

expected to have before-tax cash flow, after meeting all expenses of operation (except

 

depreciation), of $20,000 the first year, and declining $3000 per year in future years

 

(second year = $17,000; third year = $14,000; and so forth). The corporation is taxed at a

 

tax rate of 20%. If the projected income is correct, and the equipment can be sold for

 

$5000 at the end of 5 years, what after-tax rate of return would the corporation receive

 

from this venture ?

 


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This question was answered on: May 23, 2022

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