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Unformatted text preview: PVA = 6,000 x factor 6, 8% PVA = 6,000 x 4.6229 = 27,737 PV = FV x factor PV = 2,000 x factor 6, 8% PV = 2,000 x .6302 = 1,260 Net Present Value $ 8,997 B. What if the company has a tax rate of 25%. Taking into account income taxes, calculate the new net present value. Answer: __ $5,599 (or $5,600 depending on the rounding) PV of Cash Outflows: Initial Investment $ (20,000) PV of Cash Inflows: PVA = R x factor PVA = (6,000 x .75) x factor 6, 8% PVA = 4,500 x 4.6229 = 20,803 (depreciation tax shield) PVA = [20,000/6 x .25] x factor 6, 8% PVA = 833 x 4.6229 3,851 PV = FV x factor PV = (2,000 x .75) x factor 6, 8% PV = 1,500 x .6302 = 945 Net Present Value $ 5,599...
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This note was uploaded on 11/22/2010 for the course ACC 200 taught by Professor Buckless during the Spring '08 term at N.C. State.
 Spring '08
 Buckless
 Accounting

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