is 8 percent? Why or why not? 9. Consider the following investment opportunity: Initial cost...
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is 8 percent? Why or why not? 9. Consider the following investment opportunity: Initial cost at time 0 $15 million Annual revenues beginning at time 1 $20 million Annual operating costs exclusive of depreciation $13 million Expected life of investment 5 years Salvage value after taxes $ 0 Annual depreciation for tax purposes $ 3 million Tax rate What is the rate of return on this investment? Assuming the investor wants to earn at least 10 percent after corporate taxes, is this investment attractive? 40%
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