Using the Tax Shield Approach, Calculate OCF Given the Following

question 166

Multiple Choice

Using the tax shield approach, calculate OCF given the following information: Sales $885,000; Costs $670,000; Depreciation $120,000. Tax rate is 35%.

• A) 165,500
• B) $171,750
• C) $175,500
• D) $181,750
• E) $185,500

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Definitions:

Marginal Cost

The additional cost incurred by producing one more unit of a product or service, an important concept for decision-making in economics.

Externalities

Unintended financial outcomes affecting individuals not directly engaged, potentially leading to good or bad impacts.

External Costs

Costs that are not borne by the producer or consumer of a good or service, but by society or the environment.

MSC (Marginal Social Cost)

The total cost to society of producing an additional unit of a good or service, including both the private costs and any external costs.