Which of the Following Statements About Tax Minimization Is True

question 41

Multiple Choice

Which of the following statements about tax minimization is true?

• A) Tax minimization always maximizes the NPV of a transaction.
• B) Tax minimization should be the goal of business and financial planning.
• C) Tax minimization with respect to a transaction may not be the optimal strategy.
• D) Tax minimization has no effect on nontax cash flows.

---

Definitions:

Income Tax Expense

The amount of money a company or individual owes to the government based on earned income, reflecting the tax rate and taxable earnings for a fiscal period.

Income Tax Rate Change

A modification in the percentage that individuals or corporations are required to pay to the government from their income.

Future Liability

A financial obligation or debt that a company is required to pay at a future date.

Income Tax Expense

The total amount of income tax a company is required to pay to the government, reflected as an expense in its income statement.