Net Present Value and Cash Flow
8. Year 0 Year 1 Year 2
Taxable income $9,100 $10,250 $15,300
Marginal tax rate .30 .30 .30
Tax $2,730 $3,075 $4,590
Revenue $13,000 $16,250 $23,400
Expenses (4,250) (8,000) (8,100)
Tax cost (2,730) (3,075) (4,590)
Net cash flow $6,020 $5,175 $10,710
Discount factor (6%) .943 .890
Present value $6,020 $4,880 $9,532
NPV $20,432
11. a. Year 0 Year 1 Year 2 Year 3 Year 4
Before-tax cash flow $(500,000) $52,500 $47,500 $35,500 $530,500
Tax cost...
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