If Rudy has a 25% tax rate and a 6% after-tax rate of return,a $30,000 tax deduction in four years will save how much tax in today's dollars? Use Exhibit 3.1.(Round present and future value amounts to 3 places)

Question

Quizplus · Accepted Answer

The tax savings from a $30,000 deduction is $30,000 * 25% = $7,500. To find the present value of this amount, we discount it using the after-tax rate of return of 6% over four years: $7,500 / (1 + 0.06)^4 = $5,940.

If Rudy Has a 25% Tax Rate and a 6