When Computing the Adjusted Cash Flow from Assets, the Tax

question 28

Multiple Choice

When computing the adjusted cash flow from assets, the tax amount is calculated as:

• A) EBT(TC).
• B) (EBT − Depreciation)(TC).
• C) (EBIT + Depreciation − Change in NWC − Capital spending)(TC).
• D) EBIT(TC).
• E) (EBIT − Depreciation − Change in NWC − Capital spending)(TC).

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Definitions:

Product Cells

Small, autonomous manufacturing units within a facility focused on producing a specific family of products or components.

Predetermined Factory Overhead Rate

The rate used to apply factory overhead costs to the goods manufactured. The rate is determined by dividing the estimated total factory overhead costs by the estimated activity base at the beginning of the fiscal period.

Factory Overhead Costs

Expenses related to running a factory that cannot be directly attributed to specific units produced, such as maintenance and utilities.

Value-Added Time

The portion of the production process where actual value is added to the product, as opposed to non-value-added activities.