Suppose your firm uses the NPV rule in making investment decisions and your after-tax OCF is $900,000. Assume same full debt funding at 12%, tax rate is 40%, 20 year period, straight-line depreciation, initial investment of $4,000,000 and after-tax exit cost of $3,000,000.
A)What will be the before-tax OCF?
B) If the Required before-tax return on the investment is 14%, what is the NPV and do you make the investment?
C) How about if your firm requires a 8.4% after tax rate of return?
D) What is the IRR?