Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 29

A group of private equity investors provided $16 million to a start-up company involved in making high-technology detection systems for drugs and other types of contraband. Immediately after the investment was made, another invest­ment opportunity came up for which the investors didn't have enough capital. That project would have yielded an estimated rate of return of 29% per year before taxes. If the group's effective tax rate is 32%, what after-tax rate of return would the forgone project have yielded