Legal Methods of Reducing Your Taxes Include All of the Following

question 84

Multiple Choice

Legal methods of reducing your taxes include all of the following except

• A) organizing your records to track appropriate expenses and contributions.
• B) preparing your return early in the year so you are not rushed.
• C) seeking the advice of an accountant.
• D) overstating cash contributions to Salvation Army Christmas kettles.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present value, reflecting the time value of money and risk.

Profitability Index (PI)

The profitability index is a calculation used to assess the relative profitability of an investment, based on its present value of future cash flows per unit of investment.

Profitability Index (PI)

A calculation that relates the benefits of an investment project to its costs, often used to compare the attractiveness of different projects.

Discount Rate

The rate at which an individual discounts future cash flows to determine their present value, essential in capital budgeting to assess the profitability of investments.