The lower the tax rate, the _______the after- tax profits and the ________ the after- tax net present value of an investment.
A)lower; higher
B)higher; higher
C)lower; lower
D)higher; lower

Question

Quizplus · Accepted Answer

Lower tax rates increase after-tax profits because businesses get to keep a larger portion of their earnings. Similarly, the after-tax net present value (NPV) of an investment increases as the tax rate decreases, because the future cash flows from the investment are less reduced by taxes, making the investment more valuable.

The Lower the Tax Rate, the _______The After- Tax Profits