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Firm V must choose between two alternative investment opportunities. On the basis of current tax law, the firm projects that the NPV of Opportunity 1
Firm V must choose between two alternative investment opportunities. On the basis of current tax law, the firm projects that the NPV of Opportunity 1 is significantly less than the NPV of Opportunity 2. The provisions in the tax law governing the tax consequences of Opportunity 1 have been stable for many years. In contrast, the provisions governing the tax consequences of Opportunity 2 are extremely complicated and have been modified by Congress several times during the past five years.
Firm V must choose between two alternative investment opportunities. On the basis of current tax law, the firm projects that the NPV of Opportunity 1 is significantly less than the NPV of Opportunity 2. The provisions in the tax law governing the tax consequences of Opportunity 1 have been stable for many years. In contrast, the provisions governing the tax consequences of Opportunity 2 are extremely complicated and have been modified by Congress several times during the past five years.
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