Corporation VB was formed in 2018. Immediately prior to year end, VB is considering a $500,000 deductible expenditure. It can either make the expenditure before the end of 2018, or wait until 2019. However, if it waits the cost of the expenditure will increase to $525,000. Before considering this expenditure, VB has the following projected pre-tax cash flows and taxable income for 2018, 2019, and 2020. Use Appendix A.

	2018			2019			2020
Taxable income and pre-tax cashflow	$	120,000		$	400,000		$	700,000

1. Using a 5 percent discount rate, compute the NPV of VB's after-tax cashflows if the expenditure is in 2018.
2. Using a 5 percent discount rate, compute the NPV of VB's after-tax cashflows if the expenditure is in 2019.
3. Based on your calculations, when should VB make this expenditure?

Corporation VB was formed in 2018. Immediately prior to year end, VB is considering a $500,000 deductible expenditure. It can either make the expenditure before the end of 2018, or wait until 2019. However, if it waits the cost of the expenditure will increase to $525,000. Before considering this expenditure, VB has the following projected pre-tax cash flows and taxable income for 2018, 2019, and 2020. Use Appendix A. 2020 2018 2019 Taxable income and 120,000 400,000 700,000 pre-tax cashflow a. Using a 5 percent discount rate, compute the NPV of VB's after-tax cashflows if the expenditure is in 2018. b. Using a 5 percent discount rate, compute the NPV of VB's after-tax cashflows if the expenditure is in 2019. c. Based on your calculations, when should VB make this expenditure? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req C Req A Req B Using a 5 percent discount rate, compute the NPV of VB's after-tax cashflows if the expenditure is in 2018. (Round discount factors to 3 decimal places. Round intermediate calculations and final answers to the nearest whole dollar amount.) NPV $581,840 Req C Req A Req B Using a 5 percent discount rate, compute the NPV of VB's after-tax cashflows if the expenditure is in 2019. (Round discount factors to 3 decimal places. Round intermediate calculations and final answers to the nearest whole dollar amount.) 610,700 NPV Req C Req B Req A Based on your calculations, when should VB make this expenditure? 2018 O2019 2020