5 Investor B has $131,000 in an investment paying 8 percent taxable interest per annum Each year B incurs $1,135 of expenses relating to this investment Compute Bs annual net cash flow assuming the following Required Bs marginal tax rate is 10 percent, and the annual expense is not deductible Bs marginal tax rate is 35 percent, and the annual expense is deductible Bs marginal tax rate is 25 percent, and the annual expense is not deductible Bs marginal tax rate is 40 percent, and only $680 of the annual expense is deductible (For all requirements, round your intermediate calculations to the nearest whole dollar amount ) Amount a Net cash flow b Net cash flow c Net cash flow d Net cash flow 6 Firm E must choose between two alternative transactions Transaction 1 requires a $12,450 cash outlay that would be nondeductible in the computation of taxable income Transaction 2 requires a $17,500 cash outlay that would be a deductible expense Required Determine the after tax cost for each transaction Assume Firm Es marginal tax rate is 10 percent Determine the after tax cost for each transaction Assume Firm Es marginal tax rate is 30 percent REQ A Transaction 1 transaction 2 After tax cost REQ B Transaction 1 transaction 2 After tax cost 7 Firm Q is about to engage in a transaction with the following cash flows over a three year period Use Appendix A and Appendix B Year 0 Year 1 Year 2 Taxable revenue $ 13,200 $ 22,400 $ 25,700 Deductible expenses (3,700 ) (7,100 ) (12,200 ) Nondeductible expenses (845 ) (3,600 ) 0 Required If the firms marginal tax rate over the three year period is 30 percent and its discount rate is 6 percent, compute the NPV of the transaction (Expenses and cash outflows should be indicated by a minus sign Round discount factor(s) to 3 decimal places and final answer to the nearest whole dollar amount ) Year 0 Year 1 Year 2 Revenue Expenses Tax cost Net cash flow $0 $0 $0 Discount factor Present value $0 $0 NPV

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5. Investor B has $131,000 in an investment paying 8 percent taxable interest per annum. Each year B incurs $1,135 of expenses relating to this

Investor B has $131,000 in an investment paying 8 percent taxable interest per annum. Each year B incurs $1,135 of expenses relating to this investment. Compute Bs annual net cash flow assuming the following: Required:

Bs marginal tax rate is 10 percent, and the annual expense is not deductible.
Bs marginal tax rate is 35 percent, and the annual expense is deductible.
Bs marginal tax rate is 25 percent, and the annual expense is not deductible.
Bs marginal tax rate is 40 percent, and only $680 of the annual expense is deductible.

(For all requirements, round your intermediate calculations to the nearest whole dollar amount.)

		Amount
a.	Net cash flow
b.	Net cash flow
c.	Net cash flow
d.	Net cash flow

Firm E must choose between two alternative transactions. Transaction 1 requires a $12,450 cash outlay that would be nondeductible in the computation of taxable income. Transaction 2 requires a $17,500 cash outlay that would be a deductible expense. Required:

Determine the after-tax cost for each transaction. Assume Firm Es marginal tax rate is 10 percent.
Determine the after-tax cost for each transaction. Assume Firm Es marginal tax rate is 30 percent.

REQ A:

	Transaction 1	transaction 2
After-tax cost

REQ B:

	Transaction 1	transaction 2
After-tax cost

Firm Q is about to engage in a transaction with the following cash flows over a three-year period. Use Appendix A and Appendix B.

	Year 0			Year 1			Year 2
Taxable revenue	$	13,200		$	22,400		$	25,700
Deductible expenses		(3,700	)		(7,100	)		(12,200	)
Nondeductible expenses		(845	)		(3,600	)		0

Required: If the firms marginal tax rate over the three-year period is 30 percent and its discount rate is 6 percent, compute the NPV of the transaction. (Expenses and cash outflows should be indicated by a minus sign. Round discount factor(s) to 3 decimal places and final answer to the nearest whole dollar amount.)