Ashley runs a small business that makes snow skis. She expects the business to grow substantially over the next three years. Because she is concerned about product liability and is planning to take the company public in year 2, she currently is considering incorporating the business. Pertinent financial data are as follows: Sales revenue Tax-free interest income Deductible cash expenses Tax depreciation Year 1 Year 2 Year 3 $150,000 $320,000 $600,000 5,000 8,000 15,000 30,000 58,000 95,000 25,000 20,000 40,000 Ashley expects her combined Federal and state marginal income tax rate to be 25% over the three years before any profits from the business are considered. Assume that the corporation will face a flat 21% Federal corporate income tax and no state income tax. Ashley's after-tax cost of capital is 10%, and the related present value factors are: for 2019, 0.8929; for 2020, 0.7972; and for 2021, 0.7118. Click here to access the tax table to use for this problem. Enter all amounts as positive numbers. When required, round your answers to the nearest dollar. a. Considering only these data, compute the present value of the future cash flows for the three-year period, assuming that Ashley incorporates the business and pays all after-tax income as dividends (for Ashley's dividends that qualify for the 15% rate). Year 1 Year 2 Year 3 Taxable income 95,000 242,000 465,000 Corporate tax liability 23,750 60,500 116,250 Cash available for dividends before taxes 125,000 270,000 520,000 Less: corporate tax liability 23,750 60,500 116,250 Equals: cash available for dividends after 101,250 209,500 403,750 taxes Less: tax on dividend at 15% rate After-tax cash flow Present value of cash flow 15,188 31,425 60,563 86,063 178,075 343,188 76,845 141,961 244,281 b. Considering only these data, compute the present value of the future cash flows for the period, assuming that Ashley continues to operate the business as a sole proprietorship. Taxable income Individual tax liability Cash available for withdrawals before taxes Less: individual tax liability Equals: cash available for withdrawals after taxes Present value of cash flow: Year 1 Only if she needs to pay out dividends Only if she does not need to pay out dividends Year 2 00000 Year 3