APPENDIX A Present Value of $1 Periods 3% 4% 5% 6% 7% 8% 9% 0.971 0.962 0.952 .943 0.935 0.926 0.917 0.943 .925 0.907 0.890 0.873 0.857 0.842 .915 0.889 ).864 .840 0.816 ).794 0. 772 0.888 0.855 0.823 ).792 0.763 0.735 0.708 ).863 0.822 0.784 ).747 0.713 0.681 0.650 .837 0.790 .746 .705 0.66 0.630 0.596 0.813 0.760 0.711 0.665 .623 ).583 0.547 .78 0.731 0.677 .627 0.582 0.540 0.502 .76 0.70 0.645 0.592 ).544 0.50 0.460 10 .744 0.676 0.614 ).558 0.508 ).463 0.422 11 0.722 0.650 0.585 0.527 0.475 ).429 0.388 12 0.701 0.625 0.557 0.497 0.44 0.397 .356 13 0.681 0.601 0.530 .469 0.41 .368 0.326 14 0.661 0.577 ).505 0.442 0.388 0.340 0.299 15 0.642 0.555 0.481 0.417 0.36 0.315 0.275 16 0.623 0.534 0.458 0.394 0.339 0.292 0.252 17 0.605 0.513 0.436 0.371 0.317 0.270 0.231 18 0.587 0.494 0.416 0.350 0.296 0.250 0.212 19 0.570 0.475 0.396 .33 0.277 0.232 0.194 20 ).554 0.456 0.377 0.312 0.258 0.215 0.178 Periods .0% 10/% 12% 13% 14% 15% 20% .909 .90 .893 .885 0.877 0.870 0.833 ).82 0.812 ).79 ).783 .769 0.756 0.694 0.751 0.731 0.712 .693 0.675 .658 0.579 0.683 0.659 0.636 0.613 .592 .572 0.482 0.621 0.593 ).567 0.543 .519 0.497 0.402 DO QUIA WN 0.564 0.535 ).507 ).480 0.456 0.432 0.335 0.513 0.482 0.452 0.425 0.400 0.37 0.279 0.467 0.434 ).404 0.376 .351 ).327 0.233 0.424 0.39 .361 ).333 .308 ).284 0.194 10 0.386 0.352 .322 .29 0.270 0.247 0.162 11 0.350 0.317 0.287 .26 0.237 0.215 0.135 12 0.319 0.286 0.257 0.231 0.208 0.187 0.112 13 0.290 0.258 0.229 .204 0.18 0.163 0.093 14 0.263 0.232 0.205 .181 0.160 0.141 0.078 15 ).239 0.209 0.183 0.160 0.140 0.123 0.065 16 0.218 0.188 0.163 0.14 0.123 .107 0.054 17 0.198 0.170 0.146 0.125 0.10 0.093 0.045 18 .180 0.153 0.130 0.111 0.095 0.081 0.038 19 0.164 0.138 0.116 0.098 0.083 0.070 0.031 20 .149 0.124 0.104 0.087 0.073 0.061 0.026APPENDIX B Present Value of Annuity of $1 Periods 3% 4% 5% 6% 7% 0.971 8% 9% 0.96 0.952 0.943 .913 0.935 0.926 1.886 0.917 W N 1.859 1.833 .808 1.783 2.82 2.77 1.759 2.723 4 2.673 2.624 3.71 2.57' 3.630 2.531 3.546 5 3.465 3.387 4.580 3.312 4.452 3.240 4.329 6 4.212 4.100 5.417 5.242 3.993 3.890 5.076 4.917 4.767 5.230 4.623 6.002 4.486 5.786 5.582 5.389 7.020 5.206 5.733 5.033 5.463 6.210 5.971 7.786 7.435 5.74 5.535 7.108 10 6.802 6.515 8.530 6.247 8.111 5.995 7.722 11 7.360 7.024 9.253 6.710 8.760 6.418 8.306 12 7.887 7.499 9.954 7.139 9.385 6.805 8.863 13 8.384 7.943 10.635 7.536 9.986 7.161 9.394 14 8.853 8.358 11.296 7.904 10.563 7.487 9.899 15 9.295 8.745 11.938 8.24 11.118 7.786 10.380 16 9.712 9.10 12.561 8.559 11.652 8.061 10.838 17 10.106 9.447 13.166 12.166 8.851 8.313 18 11.274 10.477 9.763 13.754 12.659 9.12 8.544 11.690 19 10.828 0.059 14.324 13.134 9.372 20 12.085 8.756 11.158 10.336 14.877 9.604 13.590 8.950 12.462 11.470 10.594 9.818 9.129 Periods 10% 11% 12% 13% 14% 0.909 15% 0.901 20% 0.893 0.885 0.87 0.870 1.736 1.713 0.833 1.690 1.668 1.647 2.487 1.626 2.444 1.528 2.402 2.361 2.322 2.106 Ja VIA WN 3.170 2.283 3.102 3.037 2.97 3.791 2.914 2.855 3.696 2.589 3.605 .517 4.355 3.433 3.352 4.231 2.991 4.111 3.998 3.889 4.868 4.712 .78 3.326 4.564 1.423 4.288 5.335 4.160 3.605 5.146 4.968 1.799 4.639 5.759 4.487 5.537 3.837 5.328 5.132 10 4.946 5.145 4. 772 5.889 4.031 5.650 5.42 5.216 5.019 5.49 6.207 4.192 5.938 12 5.687 5.453 6.814 5.234 5.492 4.327 6.194 13 5.918 5.660 .103 5.42 6.750 4.439 6.424 6.122 14 5.842 5.583 7.367 5.982 4.533 5.628 5.302 15 5.002 7.606 5.724 7.191 4.611 6.811 16 6.462 5.142 7.824 5.847 .379 4.675 6.97 6.604 17 5.265 5.954 8.022 4.730 7.549 7.120 5.729 18 5.373 6.047 3.20 7.702 4.775 7.250 5.840 19 6.467 8.365 5.128 7.839 4.812 7.366 20 5.938 6.550 8.514 .198 4.843 7.963 7.469 7.025 6.623 6.259 4.870French Corporation wishes to hire Leslie as a consultant to design a comprehensive staff training program. The project is expected to take one year, and the parties have agreed to a tentative price of $65,500. French Corporation has proposed payment of one-half of the fee now, with the remainder paid in one year when the project is complete. Use Appendix A and Appendix B. Required: a. If Leslie expects her marginal tax rate to be 20 percent this year and 30 percent next year, calculate the after-tax net present value of this contract to Leslie, using a 6 percent discount rate. b. French Corporation expects its marginal tax rate to be 26 percent both years. Calculate the net present value of French's after-tax cost to enter into this contract using a 6 percent discount rate. c1. Given that Leslie expects her tax rate to increase next year, she would prefer to receive more of the income from the project up front. Consider an alternative proposal under which French pays Leslie $46,000 this year, and $17,000 in one year when the contract is complete. Calculate the after-tax benefit of this counterproposal to Leslie and the after-tax cost to French. c2. Are both parties better off under this alternative than under the original plan? Complete this question by entering your answers in the tabs below. Req A Reg B Req C1 Req C2 If Leslie expects her marginal tax rate to be 20 percent this year and 30 percent next year, calculate the after-tax net present value of this contract to Leslie, using a 6 percent discount rate. Note: Cash outflows and negative amounts should be indicated by a minus sign. Round discount factors to 3 decimal places. Round intermediate calculations and final answers to the nearest whole dollar amount. Show less A Amount Year 0: Cash received $ 32,750 Tax cost Net cash flow $ 32,750 Year 1: Cash received $ 32,750 Tax cost 9,825 Net cash flow $ 22,925 Discount factor (6%) 0.943 Present value of year 1 cash flow 21,618 NPV $ 47,818