Which of the following would be most likely to occur in the year after Congress,

Question

Which of the following would be most likely to occur in the year after Congress, in an effort to increase tax revenue, passed legislation that forced companies to depreciate equipment over longer lives? Assume that sales, other operating costs, and tax rates are not affected, and assume that the same depreciation method is used for tax and stockholder reporting purposes.

a. Companies’/ s net operating profits after taxes (NOPAT) would decline.
b. Companies’/ s physical stocks of fixed assets would increase.
c. Companies’/ s net cash flows would increase.
d. Companies’/ s cash positions would decline.
e. Companies’/ s reported net incomes would decline.

Explanation / Answer

d) lower depreciation writeoffs mean higher taxes and thus lower cash flow.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.