MrQuest Plans to Engage in a Transaction That Will Generate

question 37

Multiple Choice

Mr.Quest plans to engage in a transaction that will generate $10,000 cash flow in year 0,year 1,and year 2 ($30,000 total cash flow) .Which of the following statements is true?

• A)If the cash flow is not taxable income,the before-tax and after-tax cash flows from the transaction are equal.
• B)If the cash flow is not taxable income,the NPV of the transaction is $30,000.
• C)Mr.Quest's discount rate for computing the NPV of the transaction depends on his marginal tax rate.
• D)None of the above is true.

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