Which of the Following Statements About Different Tax Rates Over

question 33

Multiple Choice

Which of the following statements about different tax rates over time is false?

• A) A 5% increase in the tax rate for year 10 has less effect on NPV than a 5% increase in the tax rate for year 4.
• B) Future tax rates used in NPV calculations are estimates because Congress can change the statutory rates every year.
• C) A NPV calculation must assume a constant tax rate for all future periods.
• D) A firm's future tax rate may change because of increases or decreases in future taxable income.