A company anticipates incremental net income (i.e., incremental taxable income) of $37,000 in year 3 of a project. The company's tax rate is 30% and its after-tax discount rate is 8%.Click here to view Exhibit 14B-1 to determine the appropriate discount factor(s) using table.The present value of this future cash flow is closest to: (Round your final answer to the nearest whole number.)

A) $11,100
B) $8,813
C) $25,900
D) $20,565

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Fisko Renandi · Accepted Answer

Final Answer : D, Explanation :  First, calculate the after-tax income: $37,000 * (1 - 0.30) = $25,900. Then, using an 8% discount rate for year 3, the discount factor from the table (not provided here, but typically for year 3 at 8% it would be around 0.7938). So, the present value = $25,900 * 0.7938 ≈ $20,565, rounded to the nearest whole number.

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