PRIN.OF CORP.FINANCE-CONNECT ACCESS
PRIN.OF CORP.FINANCE-CONNECT ACCESS
13th Edition
ISBN: 2810023360757
Author: BREALEY
Publisher: MCG
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Chapter 19.A, Problem 1Q

The U.S. government has settled a dispute with your company for $16 million. The government is committed to pay this amount in exactly 12 months. However, your company will have to pay tax on the award at a marginal tax rate of 21%. What is the award worth? The one-year Treasury rate is 5.5%.

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