Just as It Is Important for an Investor to Consider

Multiple Choice

Just as it is important for an investor to consider the impact of financial leverage on her return, it is also necessary to account for the effect of income taxes. How would the presence of income taxes impact the levered going-in IRR?

A) Income taxes increase the levered going-in-IRR
B) Income taxes reduce the levered going-in-IRR
C) Income taxes do not affect the going-in-IRR
D) Income taxes cause the levered going-in-IRR to become invalid as a measure of return.