Which of the Following Statements Regarding Tax Credits Is True

question 68

Multiple Choice

Which of the following statements regarding tax credits is true?

• A) Tax credits reduce taxes payable dollar for dollar.
• B) Tax credits provide a greater tax benefit the greater the taxpayer's marginal tax rate.
• C) Tax credits reduce taxable income dollar for dollar.
• D) None of these statements is true.

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Definitions:

Internal Rate

The discount rate at which the net present value of all cash flows from a particular project or investment equals zero, used in evaluating the profitability of investments.

Accept

To agree to take or receive something offered.

Profitability Index

A financial tool used to evaluate the desirability of an investment, calculated by dividing the present value of future cash flows by the initial investment.