Firm W, which has a 30 percent marginal tax rate, plans to operate a new business that should generate $44,000 annual cash flow/ordinary income for three years (years 0, 1, and 2). Alternatively, Firm W could form a new taxable entity (Entity N) to operate the business. Entity N would pay tax on the three-year income stream at a 20 percent rate. The nondeductible cost of forming Entity N would be $5,400. Firm W uses a 6 percent discount rate. Use Appendix A and Appendix B.

Required:

1. Complete the below tables to calculate NPV.
2. Should it operate the new business directly or form Entity N to operate the business?