When evaluating project cash flows in a financial decision, __________.
A) Taxes can generally be ignored since they are a non-cash expense.
B) The financial manager should compute and use the marginal tax rate.
C) The marginal tax rate and average tax rate are of equal importance.
D) The financial manager should use the tax rate that is equal to the total tax liability divided by total taxable income.
E) Taxes are irrelevant unless income for the firm is greater than zero.

Question

Quizplus · Accepted Answer

The financial manager should compute and use the marginal tax rate because it represents the rate at which future cash flows will be taxed, directly affecting the project's net cash flows and thus its valuation.

When Evaluating Project Cash Flows in a Financial Decision, __________