Jan is choosing between three alternative investments, each of which will require a $100,000 initial outlay. Determine the present value of the after-tax cash flows from investment B described below.

Assume the following in your computations:

• Jan is in the 24% marginal bracket; Long-Term Capital Gains rate is 15%;
• All tax payments occur at the end of the year;
• 4% discount rate (present value interest factors are below).

N	PV $1	PV Annuity
1	0.962	0.962
2	0.925	1.887
3	0.889	2.776

Investment B is a corporate bond that will pay 7% interest at the end of each year for 3 years, with the principal recovered at the end of the 3^rd year. (the answer is $3,668, but can you show the work)

Answer rating: 100% (QA)

SOLUTION The work for calculating the present value of the aftertax cash flows from investment B 1 C... View the full answer