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2 votes
The after-tax IRR is simply the IRR calculation on the before-tax cash flows.

a. True
b. False

1 Answer

1 vote

Final answer:

The statement in question is false; the after-tax IRR is different from the before-tax IRR as it accounts for the effects of taxation on cash flows.

Step-by-step explanation:

The statement 'The after-tax IRR is simply the IRR calculation on the before-tax cash flows' is false. The Internal Rate of Return (IRR) is a financial metric used to evaluate the profitability of investments, but the after-tax IRR differs from the before-tax IRR as it takes into account tax implications on the project cash flows. While before-tax IRR is calculated on the cash flows before they are adjusted for taxes, the after-tax IRR is calculated using cash flows after taxes have been deducted. It is critical to consider the impact of taxes as they can significantly affect the project's value and the decision-making process. Calculating after-tax IRR is essential for a more accurate measurement of an investment's potential return.

answered
User Yuri Malheiros
by
7.1k points
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