Course Solutions Uncategorized (Answered) : If a firm’s after-tax minimum attractive rate of retum is 12% and its combined incremental income tax rate is 34%, which alternati

(Answered) : If a firm’s after-tax minimum attractive rate of retum is 12% and its combined incremental income tax rate is 34%, which alternati

If a firm’s after-tax minimum attractive rate of retum is 12% and its combined incremental income tax rate is 34%, which alternative should be selected? Alt. AAlt. B $11,000 $33,000 Initial cost Uniform annual benefit 3,000 9,000 End-of-depreciable-life 2,000 3,000 salvage value Depreciation method End-of-useful-life SOYD SOYD 2,000 5,000 salvage value obtained Depreciable life, in years Useful life, in years 5

Expert Answer


For Alt. A, the following will be final value =

$(11,000-3,000-2,000) = $6,000.

For Alt. B, the following will be final value =

$(33,000-9,000-5,000) = $19,000.

So, Alt. A should be selected.

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