ern plans to invest $100,000 in a growth stock in year 0. The stock is not expected to pay dividends. However, Vern predicts that it will be worth $135,000 when he sells it in year 3. The $35,000 increase in value will be taxable at the preferential capital gains rate of 15 percent. Use Appendix A and Appendix B.
Required:
a. Using a 4 percent discount rate, calculate the net present value of after-tax cash flows from this investment.
Note: Round discount factor(s) to 3 decimal places. Round your intermediate calculations and final answer to the nearest whole dollar amount.
Required:
Compute the value of the preferential rate to Mr. Lanier.
Note: Round your answer to the nearest whole dollar amount.