Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. suppose mr. agirich has decided to buy a center pi

Suppose Mr. Agirich has decided to buy a center pivot irrigation system but can't decide...

90.2K

Verified Solution

Question

Accounting

Suppose Mr. Agirich has decided to buy a center pivot irrigation system but can't decide between buying a new or used system. Mr. Agirich has determined that the NPV(new)=$4,500 and the NPV(used)=$2,000. Mr. Agirich wants to choose the new system because it has a higher NPV but is not sure because he has heard that NPV is not the correct criterion for investment comparisons if the investments have different economic lives. Suppose Mr. Agirich learns that you have taken a financial management course at TAMU and has asked you to help him decide whether to buy the new or used irrigation system. He provides the additional information:
Mr. Agirich requires at least a 15% pre-tax rate of return on investments, the marginal tax rate is 40%, the expected rate of inflation is 3.8%, the economic life of the new system is 15 years and the economic life of the used system is 5 years.
Should Mr. Agirich buy the new or used irrigation system?
What is the nominal pre-tax discount rate?
ANSWER
What is the nominal after-tax discount rate?
ANSWER:
What is the real after-tax discount rate?
image

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Finance
1.2K views

(Financial statement? analysis)??The annual sales for? Salco, Inc. were $ 4.47 million last year. The? firm's...

Statistics
1.2K views

4. How many different ways can you put 8 balls in 8 boxes A1, . ....

Medical Sciences
1.2K views

Regarding human reproductive physiology (select the MOST CORRECT statement): One primary spermatocyte can develop into four spermatozoa. In...

Mechanical Engineering
1.2K views

Please provide the answers in clear way A company is planning to install a new automated plastic-molding press....

Accounting
1.2K views

Luke Corporation produces a variety of products, each within their own division. Last year, the managers...

Physics
1.2K views

P V and P V are initial and final pressures and volumes of a gas...

Geometry
1.2K views

11 In a computer catalog a computer monitor is listed as being 19 inches This...

Statistics
1.2K views

The distribution of all SAT scores is normally distributed with a mean of 1174 and...

Statistics
1.2K views

Given the linear correlation coefficient r and the sample size n determine the critical values...

Accounting
1.2K views

A plastic-manufacturing company owns and operates a polypropylene production facility that converts the propylene from...

Accounting
1.2K views

Financial statement fraud: 1. None of the above is true 2. May understate revenues or...

Finance
1.2K views

We cannot assume that obtaining finance (of any source) is without external costs, i.e. costs...