If a company has to pay a given amount of income taxes over the life of a capital investment,managers of the company should seek to pay the taxes as early as possible in the investment's life.

Question

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Managers of the company should aim to defer income tax payments for as long as possible in the investment's life. By doing so, the company can use the funds that would otherwise be paid in taxes to invest in its operations and generate more profits. Additionally, deferring taxes can result in a lower present value of tax payments due to inflation and the time value of money.

If a Company Has to Pay a Given Amount of Income