Merced Company has invested $200,000 in a project.It had before tax net income of $100,000 in year 1,$150,000 in year 2,and $125,000 in year 3.What is the net present value of this project's after-tax net cash flow if Merced's discount rate is 8 percent and its marginal tax rate is 34 percent in all years?
A)$11,464
B)$120,000
C)$211,464
D)$320,400

Question

Quizplus · Accepted Answer

The after-tax net income is calculated by reducing the tax from the before-tax income. The cash flows are then discounted at 8% to find the present value. The NPV is the sum of these present values minus the initial investment.

Merced Company Has Invested $200,000 in a Project