Entrepreneurs Tend to Take Greater Risks If Low Tax Rates

question 108

Multiple Choice

Entrepreneurs tend to take greater risks if low tax rates offer greater after-tax profit potentials.The government's decision to offer low tax rates to entrepreneurs is:

• A) providing room for an economic expansion.
• B) providing an incentive, in the hopes that more entrepreneurs will take risk and create economic growth.
• C) providing a disincentive, in the hopes that more entrepreneurs will avoid risk and not grow.
• D) providing a disincentive, in the hopes that entrepreneurs will not get into tax default after assuming too much risk.

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Definitions:

Administrative Fees

Charges that cover the operational costs of managing investments or conducting transactions.

WACC

Weighted Average Cost of Capital; a calculation of a firm’s cost of capital where each category of capital is proportionately weighted.

Market Values

The present rate at which a service or asset is available for purchase or sale on the market.

Book Values

The value of an asset as it appears on a balance sheet, calculated as cost minus accumulated depreciation.