Holding all other variables constant, which of the following would DECREASE annual after-tax cash flows on a project?
A)A decrease in depreciation expense
B)A decrease in the savings projected due to the project's improving product quality
C)A decrease in interest expense
D)Both a & b
E)All of the above

Question

Quizplus · Accepted Answer

A decrease in depreciation expense would lead to higher taxable income, thus increasing taxes and decreasing after-tax cash flows. A decrease in savings from improved product quality would directly reduce the project's benefits, also decreasing after-tax cash flows. Interest expense impacts the cost of financing, not the project's operational after-tax cash flows directly, as interest expense is a financing activity, not an operating activity.

Holding All Other Variables Constant, Which of the Following Would