After arriving at a positive net present value,you recently presented an investment proposal to the CFO of your company.The CFO remarks that income tax rates are expected to decrease in the next few years.How will a decrease in estimated tax rates affect the net present value?

Question

Quizplus · Accepted Answer

A decrease in estimated tax rates will result in a higher after-tax cash flow, which will increase the net present value of the investment. This is because the cash flow generated by the investment will have a lower tax liability, allowing for more money to be retained and reinvested, resulting in a higher overall return.

After Arriving at a Positive Net Present Value,you Recently Presented