Which of the Following Statements About a Recapture Is Correct

question 60

Multiple Choice

Which of the following statements about a recapture is correct?

• A) A recapture occurs when an asset's tax value is less than its undepreciated capital cost at the end of the asset's useful life
• B) A recapture occurs when an asset's tax value is greater than its market value at the end of the asset's useful life
• C) A recapture occurs when an asset's tax value is less than its market value at the end of the asset's useful life
• D) A recapture occurs when an asset's tax value is greater than its undepreciated capital cost at the end of the asset's useful life

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Definitions:

Operating Cash Flow

The cash generated from normal business operations, indicating a company's ability to generate sufficient revenue to maintain and grow its operations.

EBIT

A financial performance measurement called Earnings Before Interest and Taxes, which disregards interest and income tax outlays to assess a company's profitability.

Tax Shield Approach

A method used in financial analysis to account for the benefits of certain deductions, such as interest or depreciation, which reduce taxable income and thus tax liability.

Operating Cash Flow

Cash generated from the normal operating activities of a business over a specific period, excluding capital expenditures and investments.