Ms Card Bought an Investment That Will Generate the Following

question 47

Multiple Choice

Ms. Card bought an investment that will generate the following cash flows over a three-year period. $$\begin{array} { | l | c | c | c | } \hline & \text { Year } 0 & \text { Year } 1 & \text { Year Z } \\\hline \text { Taxeble revenue } & 42,000 & 56,000 & 80,000 \\\hline \text { Nantexaeble revenue } & 6,000 & 8,500 & 9,000 \\\hline \text { Deductible exaesese } & \text { (20,000) } & \text { (20,000) } & \text { (25,000) } \\\hline\end{array}$$ If Ms. Card's marginal tax rate over the three year period is 40% and she uses a 6% discount rate, compute the NPV of the transaction.

• A) $94,129
• B) $84,964
• C) $62,373
• D) None of the above

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Definitions:

Short-run Phillips Curve

A curve representing the inverse relationship between the rate of inflation and the rate of unemployment in an economy over the short term.

Money Supply Growth Rate

The rate at which the amount of money available in an economy is increasing.

Natural Rate of Unemployment

The level of unemployment consistent with sustainable economic growth, where the labor force and job vacancies are in equilibrium.

Monetary Policy

A strategy used by a country's central bank to control the money supply in the economy, often targeting inflation or interest rates to ensure economic stability.