Because Depreciation Is Based on Predictions of Residual Value and Useful

question 131

True/False

Because depreciation is based on predictions of residual value and useful life,depreciation is an estimate.

Analyze the impact of corporate tax rate changes on a firm's depreciation tax shield.

Apply the bottom-up approach to computing operating cash flows in various project scenarios.

Understand the role and treatment of net working capital (NWC) in project valuation.

Evaluate the effects of cost structures on pro forma statements for cost-cutting projects.

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Definitions:

Deferred Income Tax Liability

A tax obligation recorded on the balance sheet for income that has been recognized but not yet taxed.

Book Income Before Income Tax

This is the income an entity has earned before any taxes have been deducted, as reported in the financial statements.

Tax Depreciation

The depreciation expense allowed by tax authorities for tax calculation purposes, reflecting the reduction in value of assets over time.

Book Depreciation

The amount of depreciation expense that has been allocated for a fixed asset in a company's financial records.