A Business Strategy That Reduces the Tax Cost of a Transaction

question 29

True/False

A business strategy that reduces the tax cost of a transaction always increases the NPV of the transaction.

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Definitions:

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders.

Contributed Capital

The capital that shareholders contribute to a company beyond the par value of the shares they purchase.

Preferred Stock

A class of ownership in a corporation with a higher claim on assets and earnings than common stock, typically with predetermined dividend payments.

Dividends

Dividends are distributions of a portion of a company's earnings decided by the board of directors to its shareholders.