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You are considered investing in a security which will return before-tax cash flows to you of...

You are considered investing in a security which will return before-tax cash flows to you of $5000 in the first year, $1,200 in the second year, and $2,000 in the third year. If your personal tax rate is 30% and you are hoping to earn 6.5%, what would you be willing to pay for this investment?

Select one:

a. $5185.97

b. $6285.04

c. $7408.53

d. $8402.98

e. $4894.74

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Answer #1

Answer- Statement Computing Present Value Year Cash Flows Before tax Cash Flow after tax Discounted Values @6.5% Tax@30% 1500

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