XYT Company Engaged in a Transaction That Generated $50,000 Cash

question 71

Multiple Choice

XYT Company engaged in a transaction that generated $50,000 cash deposited in the company bank account and required the company to pay $12,000 out of that account.XYT's marginal tax rate is 30%.Which of the following statements is false?

• A)If the deposit is taxable income and the payment is deductible,the transaction generated $26,600 after-tax cash flow.
• B)If the deposit is taxable income but the payment is nondeductible,the transaction generated $35,000 after-tax cash flow.
• C)If the deposit is not taxable income and the payment is nondeductible,the transaction generated $38,000 after-tax cash flow.
• D)None of the above is false.

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Definitions:

Net Present Value (NPV)

NPV is the difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to assess the profitability of an investment or project.

Unbiased Cash Flows

Cash flows projection that is objective and has not been influenced by personal bias, making them fair estimates for analysis.

Overstate Cash Inflows

The act of exaggerating or reporting higher amounts of money coming into a business than what is actually being received, which can lead to a misleading financial position.

Terminal Values

In finance, the calculated value of a business or project beyond the forecast period when future cash flows can be estimated.