A company anticipates a tax-deductible cash expense of $10,000 in year 2 of a project.The company's tax rate is 30%,and its discount rate is 8%.What is the approximate present value of this future cash outflow?

Question

Quizplus · Accepted Answer

The present value of the cash outflow is calculated by discounting the after-tax expense: $10,000 * (1 - 0.30) = $7,000. Then, discount this amount to present value: $7,000 / (1 + 0.08)^2 ≈ $5,999.

A Company Anticipates a Tax-Deductible Cash Expense of $10,000 in Year