The annual after-tax cash operating inflows of a newly purchased machine are expected to be $60,000.The expected useful life of the machine is 5 years.The after-tax minimum desired rate of return,including an inflation factor,is 25%.The inflation rate is 10% per year.After adjusting for inflation,what is the rate of return used to find the net present value of the machine?

Question

Quizplus · Accepted Answer

The after-tax minimum desired rate of return, including an inflation factor, is 25%. The inflation rate is 10% per year. So, the rate of return used to find the net present value of the machine is 25% - 10% = 15%.

The Annual After-Tax Cash Operating Inflows of a Newly Purchased