Firm f must choose between two business opportunities

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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?

Reference no: EM13591341

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