If a company operates at a profit,the after-tax cost of a tax-deductible cash expense is determined by multiplying the cash expense by one minus the tax rate.

Question

Quizplus · Accepted Answer

This statement is true. The after-tax cost of a tax-deductible cash expense is reduced by the tax savings, which is equal to the tax rate multiplied by the cash expense. Therefore, the after-tax cost is calculated by subtracting the tax savings from the cash expense, which results in multiplying the cash expense by one minus the tax rate.

If a Company Operates at a Profit,the After-Tax Cost of a Tax-Deductible