In the evaluation of a capital budgeting project, taxes should be:
A)ignored.
B)treated in the same manner as sunk costs.
C)treated as a cash flow in the period in which they are incurred.
D)None of the above

Question

Quizplus · Accepted Answer

Taxes should be treated as a cash flow in the period in which they are incurred because they affect the cash flows of the project. Ignoring them or treating them as sunk costs would result in an inaccurate evaluation of the project's profitability.

In the Evaluation of a Capital Budgeting Project, Taxes Should