You will receive $590,000 now, and you will not have to pay taxes on this amount....
You will receive $590,000 now, and you will not have to pay taxes on this amount. In addition, beginning one year from today, you will receive $260,000 each year for 30 years. The cash flows from this annuity will be taxed at 28 percent. Calculate PV assuming 7% discount rate
Homework Answers
Current amount received = 590,000
After tax cash flow after 1 year for 30 years = 260,000*(1-28%) =
187200
PV of Cash Flows using annuity formula = 590,000 +
187200*(1-(1+7%)-30)/7% = 590,000 + 2,322,972.51=
2,912,972.51
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