Principles Of Taxation For Business And Investment Planning 2020 Edition
23rd Edition
ISBN: 9781259969546
Author: Sally Jones, Shelley C. Rhoades-Catanach, Sandra R Callaghan
Publisher: McGraw-Hill Education
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Question
Chapter 3, Problem 1AP
a.
To determine
Calculate
b.
To determine
Calculate net present value (NPV).
c.
To determine
Calculate net present value (NPV).
d.
To determine
Calculate net present value (NPV).
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Use the present value tables in Appendix A and Appendix B to compute the NPV of each of the following cash inflows:
Required:
a. $110,000 received at the end of six years. The discount rate is 6 percent.
b. $4,800 received annually at the end of each of the next 15 years. The discount rate is 7 percent.
c. A 10-year annuity of $7,000 per annum. The first $7,000 payment is due immediately. The discount rate is 6 percent.
d. $38,750 received annually at the end of years 1 through 5 followed by $31,250 received annually at the end of years 6 through 10.
The discount rate is 13 percent.
Note: For all requirements, round discount factor(s) to 3 decimal places, all other intermediate calculations and final answers to
the nearest whole dollar amount.
a. Net present value
b. Net present value
c. Net present value
d. Net present value
$
$
$
$
Amount
77,530
32,377
249,360
249,360
The appropriate discount rate for the following cash flows is 7.58
percent per year:
Year
1
2
3
4
Cash Flow
$2,520
$0
$3,960
$2,210
What is the present value of the cash flows as of Year O?
$7,025.36
$7,537.38
$6,941.87
$7,321.33
$7,172.91
Consider two streams of cash flows, A and B. Stream A's first cash flow is $10,000 and is
received three years from today. Future cash flows in Stream A grow by 3 percent in
perpetulty. Stream B's first cash flow is -$8,900, is received two years from today, and
will continue in perpetuity. Assume that the appropriate discount rate is 11 percent.
a. What is the present value of each stream? (A negative amount should be indicated
by a minus sign. Do not round Intermediate calculations and round your answers to
2 decimal places, e.g., 32.16.)
Stream A
Stream B
b. Suppose that the two streams are combined into one project, called C. What is the IRR
of Project C? (Do not round Intermediate calculations and enter your answer as a
percent rounded to 2 decimal places, e.g., 32.16.)
IRR
%
c. What is the correct IRR rule for Project C?
Accept the project if the discount rate is equal the IRR.
O Accept the project if the discount rate is above the IRR.
Accept the project if the discount rate is…
Chapter 3 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 3 - Does the NPV of future cash flows increase or...Ch. 3 - Explain the relationship between the degree of...Ch. 3 - Does the after-tax cost of a deductible expense...Ch. 3 - Prob. 4QPDCh. 3 - Prob. 5QPDCh. 3 - Prob. 6QPDCh. 3 - Prob. 7QPDCh. 3 - Which type of tax law provision should be more...Ch. 3 - In the U.S. system of criminal justice, a person...Ch. 3 - Identify two reasons why a firms actual marginal...
Ch. 3 - Prob. 11QPDCh. 3 - Prob. 12QPDCh. 3 - Prob. 1APCh. 3 - Prob. 2APCh. 3 - Prob. 3APCh. 3 - Use a 5 percent discount rate to compute the NPV...Ch. 3 - Consider the following opportunities: Opportunity...Ch. 3 - Prob. 6APCh. 3 - Refer to the income tax rate structure in the...Ch. 3 - Prob. 8APCh. 3 - Company N will receive 100,000 of taxable revenue...Ch. 3 - Prob. 10APCh. 3 - Investor B has 100,000 in an investment paying 9...Ch. 3 - Firm E must choose between two alternative...Ch. 3 - Company J must choose between two alternate...Ch. 3 - Firm Q is about to engage in a transaction with...Ch. 3 - Corporation ABC invested in a project that will...Ch. 3 - Prob. 16APCh. 3 - Investor W has the opportunity to invest 500,000...Ch. 3 - Prob. 18APCh. 3 - Prob. 19APCh. 3 - Prob. 20APCh. 3 - Prob. 21APCh. 3 - Prob. 1IRPCh. 3 - Firm V must choose between two alternative...Ch. 3 - Prob. 3IRPCh. 3 - Refer to the facts in problem 3. Company WB is...Ch. 3 - Prob. 5IRPCh. 3 - Prob. 6IRPCh. 3 - Prob. 7IRPCh. 3 - Prob. 8IRPCh. 3 - Prob. 9IRPCh. 3 - Prob. 1TPCCh. 3 - Firm D is considering investing 400,000 cash in a...
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