Firm F must choose between two business opportunities. opportunity 1 will generate an $8,000 deductible loss in year 0, $5,000 taxable income in year 1, and $20,000 taxable income in year 2. Opportunity 2 will generate $5,000 taxable income in years 0 through 2. The income and loss reflect before tax cash inflow and outflow. Firm F uses a 12% discount rate to compute net present value and has a 40% marginal tax rate over the three year period.
Which opportunity should firm F choose?
Call Us: USA +1 862 207 3288