Pertinent information for two alternatives A and B is shown below. If i=10%/year and the effectiveincome tax rate is 40%, answer the following true/false questions.Alt. AAlt.B300,00050,000Basis, $CFBT, $MACRS Recovery, YearsSalvage Value, $Useful Life, YearsO True200,000O False40,000520,0006The CFAT of Alt. B at the end of year 1 is less than $5,000.530,0007

Companies invest money in projects in the hope there will be cash flows from the project in the…

Pertinent information for two alternatives A and B is shown below. If i=10%/year and income tax rate is 40%, answer the following true/false questions. Alt. A Alt.B Basis, $ CFBT, $ MACRS Recovery, Years Salvage Value, $ Useful Life, Years 200,000 40,000 5 20,000 6 300,000 50,000 5 30,000 7

Pertinent information for two alternatives A and B is shown below. If i=10%/year and income tax rate is 40%, answer the following true/false questions. Alt. A Alt.B Basis, $ CFBT, $ MACRS Recovery, Years Salvage Value, $ Useful Life, Years 200,000 40,000 5 20,000 6 300,000 50,000 5 30,000 7

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Pertinent information for two alternatives A and B is shown below. If i=10%/year and the effective
income tax rate is 40%, answer the following true/false questions.
Alt. A
Alt.B
300,000
50,000
Basis, $
CFBT, $
MACRS Recovery, Years
Salvage Value, $
Useful Life, Years
O True
200,000
O False
40,000
5
20,000
6
The CFAT of Alt. B at the end of year 1 is less than $5,000.
5
30,000
7

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Give typed solution only What is the internal rate of return of a project costing $3,000; having after-tax cash flows of $1,500 in each of the two years of its two-year life; and a salvage value of $800at the end of the second year in addition to the $1,500 cash flow? (rounded to the nearest percentage) A. 13% B. 15% C. 16% D. 19%
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