The after-tax cost of an expenditure is minimized when the expenditure is deductible in the current year.

Question

Quizplus · Accepted Answer

When an expenditure is deductible in the current year, it reduces the taxable income for that year. Therefore, the tax liability for that year is also reduced, resulting in a lower after-tax cost. Conversely, if the expenditure is not deductible in the current year, it will not have an immediate tax benefit and may lead to a higher after-tax cost.

The After-Tax Cost of an Expenditure Is Minimized When the Expenditure