Because CCA Is a Non-Cash Item, in Estimating the Annual

question 1

Multiple Choice

Because CCA is a non-cash item, in estimating the annual after-tax cash flows, we deal with it using one of the following two approaches:
I.Deduct CCA from operating income, then deduct the associated taxes payable, and finally add the amount of the CCA tax savings back.
II.Multiply the CCA by the company's effective tax rate and add this amount to the after-tax operating income.

• A)I and II are correct.
• B)I and II are incorrect.
• C)I is correct, II is incorrect.
• D)I is incorrect, II is correct.

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Definitions:

Positive Economic

An economic outlook indicating growth or constructive conditions within an economy, such as increasing GDP or employment rates.

Intermediate Stages

Phases or steps in a process or a production chain that occur between the initial and final stages.

Gross Domestic Product

The total monetary value of all finished goods and services produced within a country's borders in a specific time period, an important indicator of economic health.

Inventories

The stocks of goods, raw materials, and other assets that a company holds for the purpose of future sale or production.