Ace Company has a 25 percent marginal tax rate and uses a 10% discount rate to

Ace Company has a 25 percent marginal tax rate and uses a 10% discount rate to compute NPV. The firm started a venture that will yield the
following before-tax cash flows: year 0 $28000; year 1 $60000; year 2 $90000; year 3 $85000.

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

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 01 and 2 and would receive all the cash flows in year 3)

c.Compute the NPV if ACE can defer paying tax on years 0 and 1 cash flows until year 2. ( It would receive $90000
cash in year 2 but would pay tax on $178000 of income). It would also still receive $85000 of cash in year 3.