Consider the Following Statements About Taxes and After-Tax Cash Flows

question 13

Multiple Choice

Consider the following statements about taxes and after-tax cash flows:
I. Capital budgeting analyses should incorporate after-tax cash flows rather than before-tax cash flows.
II. Added company revenues will result in lower taxes for a firm.
III. Operating expenses may actually provide a tax benefit for an organization.
Which of the above statements is (are) correct?

• A) I only.
• B) II only.
• C) III only.
• D) I and II.
• E) I and III.

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Definitions:

Subduction Zone

A zone in which subduction takes place, either referring to the actual downgoing slab and its surroundings or to the region, including Earth’s surface, above the subducting slab.

Mid-Ocean Ridge

A long mountain range on the floor of the ocean, associated with seafloor spreading.

Island Arc

A generally curved belt of volcanic islands above a subduction zone; also used as an adjective to refer to this setting.

Linear Island Chain

A series of islands aligned in a straight or nearly straight line, often formed by volcanic activity along a tectonic plate boundary.