The pre-tax investment return is 14.87% =($1,000/$500)(1/5) – 1.
The formula for the future-value interest rate factor is FVIFCGT = [(1 + R)N(1 – TCG) + TCG]
1.72 = [(1.1487)5 (1 – 0.28) + 0.28]. Thus, the after-tax value in five years is expected to be $860 = $500 × 1.72.
