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    Annual Before Tax Cash Flow

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    Question: Richard Corporation's new project calls for an investment of $10,000. It has an estimated life of 10 years. The IRR has been calculated to be 15%. If cash flows are evenly distributed and the tax rate is 40%, what is the annual before tax cash flow each year? (Assume depreciation is a negligible amount.)

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    Solution Preview

    Discounting at IRR, the PV of annual cash flows will be equal to the initial investment, since the NPV =0 at IRR. The cash flows being evenly distributed implies ...

    Solution Summary

    The annual before tax cash flows are determined.