1. Suppose that the marginal tax rate is 25%. If a farmer decides to purchase a combine it will increase his revenue by $7,500 per year, but it will also increase his expenses by $1,500 per year. The before tax rate on this investment is 30%. The life of this investment is 10 years. What is the present value of the after tax net return?
$16,067
$17,371
$13,912
$15,683
None of the answers are correct.
2. Midtown Enterprises borrowed $100,000 for 5 years at a 12 percent interest rate, compounded monthly, and makes an equal amount of payment at the end of each month. How much principal payment is the firm making during the 2nd year?
$11,164
$13,420
$15,447
18,970
$17,498