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The Return on Assets Will Be Greater Than the Rate

question 175

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The return on assets will be greater than the rate of return on common stockholders' equity if the company has been successful in trading on the equity at a gain.


Definitions:

CCA Rate

The Capital Cost Allowance rate refers to the annual depreciation rate that is applicable for tax purposes on a depreciable asset, allowing businesses to write off a portion of the asset's cost over its useful life.

After-Tax Discount Rate

The rate used to discount future cash flows to their present value after accounting for taxes.

Depreciation Tax Shield

A reduction in taxable income resulting from the allowance for depreciation expenses on assets.

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