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Just need the correct answer to the one in red, please (answers are not 4,200 or 42,000). Return to question Mr. A, who has a
Just need the correct answer to the one in red, please (answers are not 4,200 or 42,000).
Return to question Mr. A, who has a 35 percent marginal tax rate, must decide between two investment opportunities, both of which require a $50,000 initial cash outlay in year O. Investment 1 will yield $8,000 before-tax cash flow in years 1, 2, and 3. This cash represents ordinary taxable income. In year 3, Mr. A can liquidate the investment and recover his $50,000 cash outlay. He must pay a nondeductible $200 annual fee (in years 1, 2, and 3) to maintain Investment 1 2.9 points Investment 2 will not yield any before-tax cash flow during the period over which Mr. A will hold the investment. In year 3, he can sell Investment 2 for $75,000 cash. His $25,000 profit on the sale will be capital gain taxed at 15 percent. Assume a 6 percent discount rate. Use Appendix A and Appendix B a. Calculate net present value of Investment 1. b. Calculate net present value of Investment 2. c. Which investment has the greater NPV? Return to question 7 Answer is complete but not entirely correct. 2.9 Complete this question by entering your answers in the tabs below. points Required A Required B Required C Calculate net present value of Investment 1. (Enter cash outflows with a minus sign. Round discount factors to 3 deci places.) NPV of after-tax cash flow YO $ (50,000) 4,715 4,450 NPV of after-tax cash flow Y1 NPV of after-tax cash flow Y2 NPV of after-tax cash flow Y3 |$ 5,365 NPV of after-tax cash flow, Y0 to Y3 Required A Required B Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate net present value of Investment 2. (Enter cash outflows with a minus sign. Round discount factors to 3 dec olaces. NPV of after-tax cash flow YO $ (50,000) NPV of after-tax cash flow Y1 NPV of after-tax cash flow Y2 NPV of after-tax cash flow Y3 59,850 NPV of after-tax cash flow, YO to Y3 9,850 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate net present value of Investment 1. (Enter cash outflows with a minus sign. Round discount factors to 3 dec places.) $ (50,000) 4,715 NPV of after-tax cash flow YO NPV of after-tax cash flow Y1 NPV of after-tax cash flow Y2 4,450 O 42,000 0 NPV of after-tax cash flow Y3 | |$ 5,365 NPV of after-tax cash flow, Y0 to Y3Step by Step Solution
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