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There is no inflation. It is currently Year 6. From Year 1 to Year 5, Anaya ran a very simple business. Anaya's before-tax MARR is
There is no inflation. It is currently Year 6. From Year 1 to Year 5, Anaya ran a very simple business. Anaya's before-tax MARR is 10% per year. Her after-tax MARR is 8% per year. The relevant tax rate for Anaya's business is t = 20%. That is, Anaya's business paid 20% tax on its taxable income. There are no depreciable assets to worry about (so no capital cost allowances, depreciation, etc.). The cash flows and tax breaks for Anaya's business were as follows: (Anaya's business opened at the start of Year 1.) Year 1: Revenue of $2,000 and Costs of $1,000 Year 2: Revenue of $2,000, Costs of $1,000 and a tax deduction of $500. Year 3: Revenue of $2,000, Costs of $1,000 and a non-refundable tax credit of $250. Year 4: Revenue of $2,000, Costs of $1,000 and a refundable tax credit of $500 Year 5: Revenue of $2,000, Costs of $1,000 and a tax deduction of $1,500. (Anaya's business closed at the end of Year 5.) Calculate the after tax Net Present (Year 6) Value of Anaya's business. Show your work. Keep in mind it is currently Year 6, so Anaya's business is in the past. Year 6, not Year O, is the present. Select one: a. $7,590.89 b. $11,630.42 c. $10,867.03 d. $5,484.67 e. $6,255.93
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