When irene sells the investment how much cash will she have

Reference no: EM13598776

Irene is saving for a new car she hopes to purchase either two or four years from now. Irene invests $21,250 in a growth stock that does not pay dividends and expects a 8 percent annual before-tax return (the investment is tax deferred). When she cashes in the investment after either two or four years, she expects the applicable marginal tax rate on long-term capital gains to be 25 percent.

A. What will be the value of this investment two and four years from now?

Value of the investment in 2 years $
Value of the investment in 4 years $

B. When Irene sells the investment, how much cash will she have after taxes to purchase the new car (two and four years from now)?

Cash available in 2 years $
Cash available in 4 years $

Reference no: EM13598776

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