Holter Inc. owns an investment that generated $120,000 cash revenue and required $26,500 cash expenses this year. Holter's marginal tax rate is 30%. Which of the following statements is false?

Question

Quizplus · Accepted Answer

A) Before-tax cash flow = Revenue - Expenses = $120,000 - $26,500 = $93,500. B) If only $19,000 of the expenses are deductible, taxable income = $120,000 - $19,000 = $101,000. Tax = 30% of $101,000 = $30,300. After-tax cash flow = $120,000 - $30,300 - ($26,500 - $19,000) = $63,200. C) If $105,000 of the revenue is taxable and all expenses are deductible, taxable income = $105,000 - $26,500 = $78,500. Tax = 30% of $78,500 = $23,550. After-tax cash flow = $105,000 - $23,550 + ($120,000 - $105,000) - $26,500 = $69,950. Therefore, all statements are true, making D correct.