When a company must consider taxes in determining investment,its desired capital stock is chosen such that A)MPK^{f = uc(}1 - t) B)MPK^{f = uc/(}1 - t) C)MPK^{f = t}× uc D)t × MPK^{f = uc}

Question

Quizplus · Accepted Answer

When considering taxes, the desired capital stock is chosen where the after-tax marginal product of capital (MPK^f) equals the user cost of capital (uc) adjusted for taxes, which is uc/(1 - t).

When a Company Must Consider Taxes in Determining Investment,its Desired