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  3. 1. an automaker is buying some special tools for $

1. An automaker is buying some special tools for $100,000. The tools are being depreciated...

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1. An automaker is buying some special tools for $100,000. The tools are being depreciated by double declining balance depreciation using a 4-year depreciable life and a $6250 salvage value. It is expected the tools will actually be kept in service for 6 years and then sold for $6250. The before-tax benefit of owning the tools is as follows: Year Before-Tax Cash Flow 1 $30,000 2 3 $30,000 $35,000 $40,000 $10,000 4 5 6 $10,000 6,250 Selling price Compute the after-tax rate of return for this investment situation, assuming a 30% incremental tax rate

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