Mrs Biggs invested in a business that will generate the following cash flows over a three-year period. Use Appendix A.
If Mrs Biggs' marginal tax rate over the three year period is 30% and she uses a 6% discount rate, compute the NPV of the transaction.

Question

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11ecf085_4616_35f0_b4a1_6b441202ae8a_TB1022_11
$$\mathrm { NPV } = \$ 9,500 + \$ 16,031 + \$ 22,250 = \$ 47,781$$ 
 $$\begin{array} { l c c c } 
& \text { Year } 0 & \text { Year } 1 & \text { Year } 2 \
\text { Taxable revenue } & 30,000 & 45,000 & 70,000 \
\text { Deductible expenses } & ( 15,000 ) & ( 15,000 ) & ( 20,000 ) \
\text { Nondeductible expenses } & ( 1,000 ) & ( 4,000 ) & ( 10,000 )
\end{array}$$

Mrs Biggs Invested in a Business That Will Generate the Following