Massey Corporation's nominal rate of return for capital-budgeting projects is 20%, which includes a 10% inflation rate. The present value of $1 at 20% for one year is 0.833. Assume a 40% marginal tax rate.
Required:
Calculate the after-tax present value (expressed in nominal dollars) of:
a. Receiving inflation adjusted savings of $110,000 at the end of the first year; and,
b. CCA of $70,000 to be deducted one year from now.

Question

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The Answer of Massey Corporation's nominal rate of return for capital-budgeting projects is 20%, which includes a 10% inflation rate. The present value of $1 at 20% for one year is 0.833. Assume a 40% marginal tax rate.
Required:
Calculate the after-tax present value (expressed in nominal dollars) of:
a. Receiving inflation adjusted savings of $110,000 at the end of the first year; and,
b. CCA of $70,000 to be deducted one year from now.

Massey Corporation's Nominal Rate of Return for Capital-Budgeting Projects Is