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Jan is choosing between three alternative investments, each of which will require a $100,000 initial outlay.

Determine the present value of the after-tax cash flows from the three investments described below.

Assume the following in your computations:

  • Jan is in the 24% marginal bracket; Long-Term Capital Gains rate is 15%;
  • All tax payments occur at the end of the year;
  • 4% discount rate (present value interest factors are below).

PV $1

year1 0.962

year 2 0.925

year 3 0.889

Investment C is a stock investment that is expected to be sold at the end of 3 years for $120,000. ( the answer is $4,013, but can you show the work)

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