Which of the Following Would Be Most Likely to Occur

question 23

Multiple Choice

Which of the following would be most likely to occur in the year after Congress,in an effort to increase tax revenue,passed legislation that forced companies to depreciate equipment over longer lives? Assume that sales,other operating costs,and tax rates are not affected,and assume that the same depreciation method is used for tax and stockholder reporting purposes.

• A) Companies' reported net incomes would decline.
• B) Companies' net operating profits after taxes (NOPAT)would decline.
• C) Companies' physical stocks of fixed assets would increase.
• D) Companies' net cash flows would increase.
• E) Companies' cash positions would decline.

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Definitions:

Tax and Transfer Programs

Government initiatives designed to redistribute income through taxation and then allocate these funds to various social welfare programs.

Allocating Income

The process of distributing earned income among various expenditures, savings, and investments.

Optimal Distribution

The allocation of resources in a manner that maximizes efficiency and effectiveness, often in terms of cost, access, or utility.

Earned Income Tax Credit

A refundable tax credit aimed at benefiting workers with low to moderate income, encouraging and rewarding work.