Clarification on DCF

The PV of $90,000 p.a. in perpetuity is 90,000 / 0.08 = $1,125,000. The tax is 20% x 90,000 p.a. but is 1 year later than the income. Therefore the PV of the tax will be 20% x the PV of the income, but will need discounting for 1 year because the flows are all 1 year later. 20% x 1,125,000 x 1/1.08 = $208,333 Therefore the overall PV = 1,125,000 - 208,333 = $916,667 (or $917,000 to the nearest thousand). There are other ways of calculating the PV of the tax flows giving obviously the same final answer, but this is the most efficient way :-)