If Rudy has a 25 percent tax rate and a 6 percent after-tax rate of return, a $30,000 tax deduction in four years will save how much tax in today's dollars? Use Exhibit 3.1. (Round discount factor(s)to three decimal places.)

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The tax savings from a $30,000 deduction at a 25 percent tax rate is $7,500. To find the present value of this savings in today's dollars, we use the 6 percent after-tax rate of return for four years. The present value factor for 6 percent over four years is approximately 0.792 (this can be found in financial tables or calculated using a financial calculator). Multiplying $7,500 by 0.792 gives us $5,940.

If Rudy Has a 25 Percent Tax Rate and a 6