Find the real after tax internal rate of return on the follo

Find the real after tax internal rate of return on the following cash flows expressed in real dollars (today\'s dollars, constant dollars) if the inflation rate is 5% and a five year MACRS is used. The tax rate =34%.

Please select from the following answer options and explain the answer.

27.4%

19.1%

21.2%

19.4%

Year	BTCF
0	-$10,000
1	$3,500
2	$3,500
3	$3,500
4	$3,500
5	$3,500
5*	$4,000

Solution

Year BTCF 0 -$10,000 1 $3,500 2 $3,500 3 $3,500 4 $3,500 5 $3,500 5* $4,000 IRR 27%