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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.
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. Taxable revenue Year 0 Year 1 Nondeductible expenses $ 13,000 (3,900) (350) $ 16,250 (6,000) (2,000) Year 2 $ 23,400 (8,100) 0 Deductible expenses Required: If the firm's 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.) Revenue Expenses Tax cost Year 0 Year 1 Year 2 $ 13,000 $ 16,250 $ 23,400 Net cash flow 13,000 $ 16,250 $ 23,400 Discount factor Present value $ 13,000 $ 16,250 $ 23,400 NPV
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