Why Does the Tax Amount Need to Be Adjusted When

question 36

Multiple Choice

Why does the tax amount need to be adjusted when valuing a firm using the cash flow from assets approach?

• A) The tax effect of the dividend payments must be eliminated.
• B) Only straight-line depreciation can be used when computing taxes for valuation purposes.
• C) Taxes must be computed for valuation purposes based solely on the marginal tax rate.
• D) The tax effect of the interest expense must be removed.
• E) The taxes must be computed for valuation purposes based on the average tax rate for the past ten years.

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