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' reported net incomes would decline.
B. Companies' net operating profits after taxes (NOPAT) would decline.
C. Companies' physical stocks of fixed assets would increase.
D. Companies' free cash flows would increase.
E. Companies' cash positions would decline.
Answer: E
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