A company anticipates incremental net income (i.e., incremental taxable income) of $50,000 in year 4 of a project. The company's tax rate is 30% and its after-tax discount rate is 12%. The present value of this future cash flow is closest to:
A)$22,260
B)$35,000
C)$9,533
D)$15,000

Question

Quizplus · Accepted Answer

The present value of the future cash flow is $22,260. This is calculated as follows:PV = FV / (1 + r)^nPV = $50,000 / (1 + 0.12)^4PV = $22,260

A Company Anticipates Incremental Net Income (I