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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. Year 0 Year 1 Year 2 (5,400) (700) $ 21,700 (6,300) (2,800) $ 28,300 (8,200) 0 Taxable revenue Deductible expenses $ 22,100 Nondeductible expenses S 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. Note: 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. Year 0 Year 1 Year 2 Revenue $ 22,100 $ 21,700 $ 28,300 Expenses (6,100) (9,100) (8,200) Tax cost Net cash flow $ 16,000 $ 12,600 $ 20,100 Discount factor Present value $ 16,000 $ 12,600 $ 20,100 NPV
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