Problem

If the inflation rate is 6%, find the nominal and real rates of return for the investment...

If the inflation rate is 6%, find the nominal and real rates of return for the investment shown (see table). Depreciation is straight line over five years, with salvage equal to $200 at the end of year 5. A combined marginal tax rate of 39% applies. After the nominal rate of return is found, use the equational relationship between nominal and real rate of return to find the latter.

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Solutions For Problems in Chapter 16