An company uses a technology which it purchased for $15 million. Operating costs are $2 million per year, and revenues of $7.3 million. The service life of the technology is 5 years and salvage value is $2 million. The corporate tax rate is 25%. a) Calculate the after-tax IRR using the approximate approach. b) If the after-tax MARR is 15%, is this a good investment? c) Should you do a more precise IRR calculation before finalizing your decision? Briefly explain why or why not.

An company uses a technology which it purchased for $15 million. Operating costs are $2 million per year, and revenues of $7.3 million. The service life of the technology is 5 years and salvage value is $2 million. The corporate tax rate is 25%. a) Calculate the after-tax IRR using the approximate approach. b) If the after-tax MARR is 15%, is this a good investment? c) Should you do a more precise IRR calculation before finalizing your decision? Briefly explain why or why not.

Name: An company uses a technology which it purchased for $15 million. Oper
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Description: An company uses a technology which it purchased for $15 million. Operating costs are $2million per year, and revenues of $7.3 million. The service life of the technology is 5 years and salvagevalue is $2 million. The corporate tax rate is 25%.a) Cal

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...

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