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Firm Q is about to engage in a transaction with the following cash flows over a three-year period: Year 0 Year 1 Year 2 Taxable
Firm Q is about to engage in a transaction with the following cash flows over a three-year period: Year 0 Year 1 Year 2 Taxable revenue $13,000 $16,250 $23,400 Deductible expenses (3,900) (6,000) (8,100) Nondeductible expenses (350) (2,000) -0- If the firm's marginal tax rate over the three-years period is 30 percent and its discount rate is 6 percent, compute the NPV of the transaction. Corporation ABC invested in a project that will generate $60,000 annual after-tax cash flow in years o and 1 and $40.000 annual after-tax cash flow in years 2, 3, and 4. Compute the NPV of these cash flows assuming that: a. ABC uses a 10 percent discount rate b. ABC uses a 7 percent discount rate ABC uses a 4 percent discount rate. c
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