Which of the Following Is NOT a Component of the Expected

question 86

Multiple Choice

Which of the following is NOT a component of the expected annual after-tax cash flows?

• A)The additional depreciation expense that results from the capital cost of the investment.
• B)The additional taxes paid that result from the capital budgeting decision.
• C)The incremental increase in after-tax operating income of the project.
• D)The incremental tax savings that result from the initial investment outlay.

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Definitions:

Present Value

The present value of a future amount of money or series of cash flow using a given rate of return.

Interest Rate

The fee, quantified as a percentage relative to the principal, levied by a lender on a borrower to utilize assets.

Rule of 70

A formula used to estimate the number of years required for an investment or the economy's output to double, calculated by dividing 70 by the annual growth rate.

Interest

The charge for the privilege of borrowing money, typically expressed as an annual percentage rate.