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

Rational individuals prefer a project with earlier cash flows over one with later cash flows because money can be reinvested sooner. Therefore, Project S is preferred over Project L.

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