Miller Corporation faces a marginal tax rate of 30 percent. One project that is currently under evaluation has a cash flow in the fifth year of its life that has a present value of $12,000 (after-tax). Miller Corporation assumes that all cash flows occur at the end of the year and the company uses 13 percent as its discount rate. What is the pre-tax amount of the cash flow in year 5? (Round to
the nearest dollar.) Present value tables or a financial calculator are required.
a. $15,475
b. $22,108
c. $31,582
d. $73,692
C
$12,000/0.70 = $17,142.86
Use PV Table for 5 years, 13%. Constant = 0.5428
$17,142.86 / 0.5428 = $31,582.
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