Bertram Corporation is considering an investment in equipment for $150,000.
Data related to the investment are as follows:
Income before
Year Depreciation and Taxes
1 $60,000
2 60,000
3 60,000
4 60,000
5 60,000
Cost of capital is 10 percent.
Bertram uses the straight-line method of depreciation with mid-year convention for tax purposes. In addition, its tax rate is 40 percent and the depreciable life of the equipment is four years with no salvage value. The equipment is sold at the end of the fifth year.
Required:
Determine the following amounts using after-tax cash flows:
a. Payback period
b. Accounting rate of return on original investments for each year
c. Net present value

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The Answer of Bertram Corporation is considering an investment in equipment for $150,000.
Data related to the investment are as follows:
Income before
Year Depreciation and Taxes
1 $60,000
2 60,000
3 60,000
4 60,000
5 60,000
Cost of capital is 10 percent.
Bertram uses the straight-line method of depreciation with mid-year convention for tax purposes. In addition, its tax rate is 40 percent and the depreciable life of the equipment is four years with no salvage value. The equipment is sold at the end of the fifth year.
Required:
Determine the following amounts using after-tax cash flows:
a. Payback period
b. Accounting rate of return on original investments for each year
c. Net present value

Bertram Corporation Is Considering an Investment in Equipment for $150,000