Consider the Following Statements About Taxes and After-Tax Cash Flows

question 13

Multiple Choice

Consider the following statements about taxes and after-tax cash flows:
I. Capital budgeting analyses should incorporate after-tax cash flows rather than before-tax cash flows.
II. Added company revenues will result in lower taxes for a firm.
III. Operating expenses may actually provide a tax benefit for an organization.
Which of the above statements is (are) correct?

• A) I only.
• B) II only.
• C) III only.
• D) I and II.
• E) I and III.

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Definitions:

Savings

Money set aside for future use, typically in accounts that earn interest.

Interest Annually

The total interest that accrues over the course of a year, either on investments or loans.

Payment Now

An immediate payment, as opposed to payments scheduled in the future, often required to secure a purchase or service.

Interest

The cost of borrowing money, typically expressed as a percentage of the total amount borrowed.