Consider the after-tax cash flows for Project S and Project L: A rational person would prefer ________.
A)Project S because the money can be reinvested sooner
B)Project L because they can avoid taxes by receiving cash flows later
C)information about profits instead of cash flows
D)neither investment over the other

Question

Consider the after-tax cash flows for Project S and Project L:  A rational person would prefer ________.
A)Project S because the money can be reinvested sooner 
B)Project L because they can avoid taxes by receiving cash flows later 
C)information about profits instead of cash flows 
D)neither investment over the other

Quizplus · Accepted Answer

A rational person would prefer Project S because it provides cash flows sooner, allowing for the possibility of reinvesting the funds and generating additional returns. Delaying cash flows to avoid taxes may not be the best strategy as it is uncertain what future tax rates may be and the opportunity cost of waiting for the cash flows. Therefore, Project S would be the better choice.

Consider the After-Tax Cash Flows for Project S and Project