Explain When Taxes Are Viewed as Disbursements and When as Savings

Question

Examlex · Accepted Answer

The Answer is When a firm makes an investment, the income from the project will affect the company's cash flows. If the investment yields a profit, the profits will be taxed. Since the taxes are a direct consequence of the investment, they reduce the net profits associated with that investment. In this sense, taxes associated with a project are a disbursement. If the investment yields a loss, the company may be able to offset the loss from this project against the profits from another and end up paying less tax overall. As a result, when evaluating a loss-generating project, the net savings in tax can be viewed as a negative disbursement. Income taxes thus reduce the benefits of a successful project, while at the same time reducing the costs of an unsuccessful project

Explain When Taxes Are Viewed as Disbursements and When as Savings

Essay

Correct Answer:
Verified

Explain When Taxes Are Viewed as Disbursements and When as Savings

Essay

Correct Answer:VerifiedShow Answer

Correct Answer:
Verified