Problem 04-24 (Algo) [LO 4-6, 4-7] Firm L has $710,000 to invest and is considering two alternatives. Investment A would

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Problem 04 24 Algo Lo 4 6 4 7 Firm L Has 710 000 To Invest And Is Considering Two Alternatives Investment A Would 1 (23.18 KiB) Viewed 11 times

Problem 04-24 (Algo) [LO 4-6, 4-7] Firm L has $710,000 to invest and is considering two alternatives. Investment A would pay 6 percent ($42,600 annual before-tax cash flow). Investment B would pay 4.8 percent ($34,080 annual before-tax cash flow). The return on Investment A is taxable, while the return on Investment B is tax exempt. Firm L forecasts that its 21 percent marginal tax rate will be stable for the foreseeable future. Required: a. Compute the explicit tax and implicit tax that Firm L will pay with respect to Investment A and Investment B. b-1. What is the annual after-tax cash flow for Investment A? b-2. What is the annual after-tax cash flow for Investment B? b-3. Which investment results in the greater annual after-tax cash flow?