Mr and Mrs

question 76

Multiple Choice

Mr. and Mrs. Dean own an investment that generated $60,000 cash revenue and required $12,000 cash expenses this year. The Deans' marginal tax rate is 25%. Which of the following statements is true?

• A) If only $52,000 of the revenue is taxable, but all the expenses are deductible, the Deans' after-tax cash flow is $40,000.
• B) If the revenue is taxable, but only $8,500 of the expenses are deductible, the Deans' after-tax cash flow is $38,625.
• C) The Deans' before-tax cash flow is $48,000.
• D) Both if the revenue is taxable, but only $8,500 of the expenses are deductible, the Deans' after-tax cash flow is $38,625 and the Deans' before-tax cash flow is $48,000.