Ryan Corporation.faces a marginal tax rate of 30 percent.One project that is currently under evaluation has a cash flow in the fifth year of its life that has a present value of $12,000 (after-tax).Ryan Corporation.assumes that all cash flows occur at the end of the year and the company uses 13 percent as its discount rate.What is the pre-tax amount of the cash flow in year 5? (Round to the nearest dollar.)Present value tables or a financial calculator are required.

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Quizplus · Accepted Answer

The present value of the after-tax cash flow is $12,000. To find the pre-tax cash flow, divide by (1 - tax rate): $12,000 / (1 - 0.30) = $17,143. Then, calculate the future value using the formula: Future Value = Present Value * (1 + discount rate)^n. Here, n = 5, so Future Value = $17,143 * (1.13)^5 = $31,582.