Firm L Has 400 000 To Invest And Is Considering Two Alternatives Investment A Would Pay 6 Percent 24 000 Annual Befo 1 (78.58 KiB) Viewed 17 times
Firm L has $400,000 to invest and is considering two alternatives. Investment A would pay 6 percent ($24,000 annual before-tax cash flow). Investment B would pay 4.8 percent ($19,200 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? Complete this question by entering your answers in the tabs below. Req A Req B1 and B2 Req B3 Compute the explicit tax and implicit tax that Firm L will pay with respect to Investment A Investment A Investment B Explicit tax paid Implicit tax paid < Req A Req B1 and B2 >
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? Amount b-1 Annual after-tax cash flow b-2 Annual after-tax cash flow
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