A company anticipates incremental net income (i.e., incremental taxable income) of $20,000 in year 3 of a project. The company's tax rate is 30% and its after-tax discount rate is 8%. Use Exhibit 7B-1 to determine the appropriate discount factor(s) using table.
The present value of this future cash flow is closest to:
A) $6,000
B) $4,763
C) $14,000
D) $11,116

Question

Quizplus · Accepted Answer

Income tax expense = 0.30 × $20,000 = $6,000
After-tax net cash inflow = $20,000 - $6,000 = $14,000
Present value = 0.794 × $14,000 = $11,116

A Company Anticipates Incremental Net Income (I