The Tax Shield Approach to Computing the Operating Cash Flow

question 46

Multiple Choice

The tax shield approach to computing the operating cash flow, given a tax-paying firm:

• A)ignores both interest expense and taxes.
• B)separates cash inflows from cash outflows.
• C)considers the changes in net working capital resulting from a new project.
• D)ignores all noncash expenses and their effects.
• E)recognizes that depreciation creates a cash inflow.