Which of the Following Is the Proper Calculation of a Company's

question 57

Multiple Choice

Which of the following is the proper calculation of a company's depreciation tax shield?

• A) Depreciation / tax rate.
• B) Depreciation / (1 - tax rate).
• C) Depreciation * tax rate.
• D) Depreciation * (1 - tax rate).
• E) Depreciation deduction + income taxes.

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Definitions:

All-Stock Deal

A type of acquisition where the acquiring company offers its own shares as payment to the shareholders of the target company instead of cash.

Post-Merger Firm

A company that results from the combination of two or more entities into one, through the process of a merger.

Incremental Value

The additional or extra value generated by undertaking a particular action or project compared to not doing so.

Actual Cost

Actual Cost is the total amount of money that has been spent on a project or investment, including all direct and indirect expenses.