Miller 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).Miller 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

To find the pre-tax cash flow, divide the after-tax present value 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. $17,143 / (1 + 0.13)^5 = $31,582.

Miller Corporation Faces a Marginal Tax Rate of 30 Percent