Question 13
a. Marginal tax rate is 25 percent
b. Marginal tax rate is 50 percent
c. Marginal tax rate is 40 percent
Please find the Explanation in attached images:
Question 14:
NPV = $20,434
Computation of cash flows:
Cash flows | Year 0 | Year 1 | Year 2 |
Taxable revenue | $ 13,000 | $ 16,250 | $ 23,400 |
Deductible expense | $ (3,900) | $ (6,000) | $ (8,100) |
Taxable income | $ 9,100 | $ 10,250 | $ 15,300 |
Tax @ 30% | $ (2,730) | $ (3,075) | $ (4,590) |
Income after tax | $ 6,370 | $ 7,175 | $ 10,710 |
Non deductible expenses | $ (350) | $ (2,000) | $ - |
Cashflows after tax | $ 6,020 | $ 5,175 | $ 10,710 |
Computation of NPV
Year | Cash flows after tax | Discounting factor @ 6% | Present value of Cash flows after tax |
0 | $ 6,020 | 1.000 | $ 6,020 |
1 | $ 5,175 | 0.943 | $ 4,882 |
2 | $ 10,710 | 0.890 | $ 9,532 |
NPV | $ 20,434 |
3 300 0.2046 5802167 57502220304 0.180 0. 11 0.0001 Di 13000.1106 0.14560125 13.300.000 O OKO 7312...
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