Compute the npv of the cash flows, Financial Accounting

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Ace Company has a 30 percent marginal tax rate and uses a 12% discount rate to compute NPV. The firm started a venture that will yield the following before-tax cash flows: year 0, $22,000; year 1, $60,000; year 2, $80,000; year 3, $90,000.

a. If the before tax cash flows represent taxable income in the year received, compute the NPV of the cash flows.

b. Compute the NPV if Ace can defer the receipt of years 0, 1 and 2 cash flows/ until year 3. ( It would receive no cash in years 0,1, and 2 and would receive all the cash flows in year 3)

c.  Compute the NPV if Firm Q can defer paying tax on years 0 and 1 cash flows until year 2. ( It would receive $80,000 cash in year 2 but would pay tax on $162,000 of income)


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