NWR has a choice between two strategies for reducing its taxes this year. Strategy 1 would reduce the annual tax bill by $50,000 and would not cost anything to implement. Strategy 2 would cut the annual tax bill by $65,000. However, this strategy will involve extra legal and accounting fees to make sure that it is structured properly. These extra fees will cost $20,000 on an after-tax basis Which strategy should NWR proceed with? Both strategies are equally good at saving NWR money Strategy1 Strategy 2 QUESTION 12 Kantor Company is planning a transaction that will require a $60,000 deductible cash expenditure. The transaction is structured so that Kantor will pay the cash and report the deduction this year (year 0) Compute the increase in the Net Present Value (NPV) of the transaction if it can be restructured so that Kantor will report the deduction on this year’s tax return (year 0), but pay the cash two years later (year 2), Kantor’s marginal tax rate is 25% and it uses a 9% discount rate to compute NPV Use the present value tables from your book. $8,677 O $9,014 $9,480 $7,110
