Self-Study Questions
| 1. | Given a before-tax MARR of 15% and an effective income tax rate of 22%, what is the after-tax MARR? |
| 2. | Given a before-tax MARR of 29% and a tax rate of 40%, what is the after-tax MARR? |
| 3. | Given an after-tax MARR of 20% and an effective tax rate of 35%, what is the before-tax MARR? |
| 4. | Given an after-tax MARR of 15% and an effective tax rate of 42%, what is the before-tax MARR? |
Questions 5 through 7 relate to the following table of mutually exclusive alternatives. The planning horizon is 8 years, the cash-flow streams are in after-tax terms, and the after-tax MARR is 15%.
| A0 | A1 | A2 | A6 | |
|---|---|---|---|---|
| Investment | $0 | $800,000 | $600,000 | $1,000,000 |
| Annual revenue | $0 | $450,000 | $400,000 | $700,000 |
| Annual cost | $0 | $200,000 | $180,000 | $330,000 |
| Salvage value | $0 | $100,000 | $80,000 | $140,000 ... |
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