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Carter Inc. and CCC Inc. are owned by the same family. Carter’s marginal tax rate is 21%, and CCC’s marginal tax

rate is 10%. Carter has the opportunity to engage in a transaction that will generate $500,000 taxable cash flow. Alternatively, CCC could engage in the transaction. However, CCC would incur an extra $42,500 deductible cash expense with respect to the transaction. Which of the following statements is true?

Multiple Choice