Actual After-Tax Rate of Return. [Engineering Economics]

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SUMMARY

The discussion centers on calculating the actual after-tax rate of return in the context of engineering economics. The participant determined a pre-tax return of 21% and an approximate after-tax return of 8% given a 42% effective income tax rate. The confusion arises between the terms "approximate after-tax rate of return" and "actual after-tax rate of return," indicating a need for clarification on the methodologies used to derive these figures.

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  • Knowledge of tax implications on investment returns.
  • Familiarity with engineering economics principles.
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Greetings,

I'm trying to solve a 3 part problem which has the following questions:

a) Determine the rate of return before taxes.
After Solving: Answer: 21 %

b) If the effective income tax rate is 42 percent, what is the approximate after-tax rate of return?
After Solving: Answer: 8 %

c) What is the actual after-tax rate of return?
I don't really understand this question, I can't tell the difference between (approximate after-tax rate of return) and (actual after-tax rate of return)

Does anyone Know the difference?

thanks.
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Welcome to Physics Forums.

I'm not sure either. Could you post:

  • The full problem statement.
  • The equations you used to get your answers.
 

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