Firm H has the opportunity to engage in a transaction that will generate $100,000 cash flow (and taxable income) in year 0.

Firm H has the opportunity to engage in a transaction that will generate $100,000 cash flow (and taxable income) in year 0. How does the NPV of the transaction change if the firm could restructure the transaction in a way that doesn't change before-tax cash flow but results in no taxable income in year 0, $50,000 taxable income in year 1, and the remaining $50,000 taxable income in year 2? Assume a 6 percent discount rate and a 34 percent marginal tax rate for the three-year period. Use Appendix A and Appendix B.

1. Create and Original Transaction
2. Create a Restructured transaction.

• Attachment 1
• Attachment 2