If Thomas has a 37 percent tax rate and a 12 percent after-tax rate of return, $74,000 of income in five years will cost him how much tax in today's dollars? Use Exhibit 3.1. (Round discount factor(s)to three decimal places.)

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To find the tax cost in today's dollars, calculate the tax on $74,000 at a 37% rate, which is $27,380. Then, discount this tax amount back to present value using the 12% after-tax rate of return over five years. The discount factor for 12% over five years is approximately 0.567. Thus, $27,380 * 0.567 = $15,524.

If Thomas Has a 37 Percent Tax Rate and a 12