Company K has a 30 percent marginal tax rate and
Company K has a 30 percent marginal tax rate and uses a 7 percent discount rate to compute NPV. The company started a venture that will yield the following before-tax cash flows: year 0, $12,000; year 1, $21,000; year 2, $24,000; year 3, $17,600.
a. If the before-tax cash flows represent taxable income in the year received, compute the NPV of the cash flows.
b. Compute the NPV if Company K can defer the receipt of years 0 and 1 cash flows/ income until year 2.
c. Compute the NPV if Company K can defer paying tax on years 0 and 1 cash flows until year 2.
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