Firm L has $715,000 to invest and is considering two alternatives Investment A would pay 6 percent (

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Firm L has $715,000 to invest and is considering two alternatives Investment A would pay 6 percent ($42,900 annual before-tax cash flow) Investment B would pay 45 percent ($32,175 annual before-tax cash flow) The return on Investment A is taxable, whereas the return on Investment B is tax exempt Firm L forecasts that its 35 percent marginal tax rate will be stable for the foreseeable future

a Compute the explicit tax and implicit tax that Firm L will pay with respect to Investment A and Investment B b-1 What is the annual after-tax cash flow for Investment A? b-2 What is the annual after-tax cash flow for Investment B? b-3 Which investment results in the greater annual after-tax cash flow

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