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, which can then be reinvested to potentially earn even more money in the future. Additionally, receiving cash flows later (as in Project L) does not necessarily mean a person can avoid taxes, as they may still be subject to taxation when they eventually receive the funds. Therefore, Project S is the better choice.

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