The Incremental Cash Tax Flow for a Capital Budgeting Project

question 102

Multiple Choice

The incremental cash tax flow for a capital budgeting project is calculated using which of the following formulas?

• A) Annual amortization × marginal income tax rate
• B) Annual amortization × (1 - marginal income tax rate)
• C) (Operating cash flow + annual amortization) × marginal income tax rate
• D) Operating cash flow × marginal income tax rate

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Definitions:

Flow Time

The total amount of time it takes for a unit or product to go through a production process, from start to completion.

Work-In-Process

A stage in manufacturing where materials are undergoing active processing into finished goods.

Lateness

The state of being delayed or behind the expected or scheduled time.

Desktop Publishing

The use of computers and specific software to design and produce high-quality printed documents that combine text and graphics.