A company anticipates a taxable cash receipt of $50,000 in year 4 of a project.The company's tax rate is 30%,and its discount rate is 12%.What is the approximate present value of this future cash flow? (Do not round your intermediate calculations and round the final answer to the nearest whole dollar.)

Question

Quizplus · Accepted Answer

To compute the present value of the future cash flow, we can use the formula:
PV = FV/(1+r)^n
Where PV is the present value, FV is the future value, r is the discount rate and n is the number of years.
In this case, FV is $50,000, n is 4, r is 12% and tax rate is 30%.
First, we need to calculate the after-tax cash flow by multiplying the taxable cash receipt by (1-tax rate): $50,000 x (1-0.3) = $35,000.
Then, we can use the formula to calculate the present value:
PV = $35,000 / (1+0.12)^4 = $22,243.
Therefore, the best choice is C, with the approximate present value of $22,243.

A Company Anticipates a Taxable Cash Receipt of $50,000 in Year