Sancel Inc. is planning a transaction that will generate $70,000 taxable income and cash inflow. The transaction is structured so that Sancel will receive the cash and report the income this year (year 0). Compute the increase in the NPV of the transaction if it can be restructured so that Sancel will receive the cash this year, but report the income two years later (year 2). Sancel's marginal tax rate is 30%, and it uses a 10% discount rate to compute NPV.

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The tax payment is deferred, so the present value of the tax payment is reduced. The tax payment in year 2 is $21,000 ($70,000 * 30%). The present value of this tax payment is $21,000 / (1.1)^2 = $17,355. The immediate tax payment would have been $21,000. The increase in NPV is $21,000 - $17,355 = $3,645.