Notes:

Please distinguish your final answer to each part in a clear way (e.g., with highlighter, circled, double-underlined, etc.).

Grading rubric for each problem:

All possible points if final answer correct and you show your work to support the answer.

s possible points if incorrect final answer but you show your work to support incorrect answer.

possible points if you just show correct final answer but no work to support the correct answer.

0 points if you show incorrect answer and have no work shown to support the incorrect answer.

Lets use the same scenario as with 1. But, now also assume the government allows firms to carryback its losses to two prior tax years to offset taxes on taxable income for an immediate refund in the current tax year. For each set of firm circumstances below, re-estimate the expected after-tax payoff of each project. Each letter is worth 24 points where there are 4 points for each value to be calculated for each project.

The firm had taxable income of $200,000 in each of the last two years (years t-1 and t-2).

The firm had $0 of taxable income in each of the last two years.