Firm W, which has a 34 percent marginal tax rate, plans to operate a new business that should generate $48,000 annual cash flow and ordinary income for three years (years 0, 1, and 2). Alternatively, Firm W could form a new taxable entity (Entity N) to operate the business. Entity N would pay tax on the three-year income stream at a 24 percent rate. The nondeductible cost of forming Entity N would be $5,800. Firm W uses a 6 percent discount rate. Use Appendix A and Appendix B. Required: Complete the below tables to calculate NPV. Should it operate the new business directly or form Entity N to operate the business

Firm W, which has a 34 percent marginal tax rate, plans to operate a new business that should generate $48,000 annual cash flow and ordinary income for three years (years 0, 1, and 2). Alternatively, Firm W could form a new taxable entity (Entity N) to operate the business. Entity N would pay tax on the three-year income stream at a 24 percent rate. The nondeductible cost of forming Entity N would be $5,800. Firm W uses a 6 percent discount rate. Use Appendix A and Appendix B. Required: Complete the below tables to calculate NPV. Should it operate the new business directly or form Entity N to operate the business

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter4: Income Exclusions

Section: Chapter Questions

Problem 76IIP

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Complete the below tables to calculate NPV.
Should it operate the new business directly or form Entity N to operate the business

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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