Mr Quest Plans to Engage in a Transaction That Will

Mr. Quest plans to engage in a transaction that will generate $10,000 cash flow in year 0, year 1, and year 2 ($30,000 total cash flow) . Which of the following statements is true?

A) If the cash flow is not taxable income, the before-tax and after-tax cash flows from the transaction are equal.
B) If the cash flow is not taxable income, the NPV of the transaction is $30,000.
C) Mr. Quest's discount rate for computing the NPV of the transaction depends on his marginal tax rate.
D) None of these choices are true.

Correct Answer:

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