Tax Payments Assignment
February 19th, 2020
Amanda, who is in the 32% marginal tax bracket, must decide between two investment opportunities, both of which require an initial cash outlay of $75,000 at the beginning of year 1. This investment will not yield any before-tax cash flow during the period over which Amanda will hold the investment. At the end of year 3, Amanda will be able to sell Investment B for $100,000. her $25,000 profit on the sale will be a capital gain.
Assuming a 6% discount rate and end-of-year tax payments what is the net present value. .