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:

Maximax Criterion

A decision-making strategy that seeks to maximize the maximum possible payoff, focusing on the most optimistic scenario.

Decision Under Certainty

A decision-making situation in which all relevant information is known and future outcomes are predictable.

Conditional Value

The value an entity takes under specified conditions or assumptions.

Decision Making Under Uncertainty

The process of making choices in situations where the outcomes or consequences of actions are unknown or unpredictable.