Enron Created the Following SPE(s)to Hide Off-Balance Sheet Liabilities, Recognize

question 20

Multiple Choice

Enron created the following SPE(s) to hide off-balance sheet liabilities, recognize revenues early , and recognize profits on own shares:

• A)LJM
• B)LJM1/Rhythms
• C)LJM2/Raptors
• D)Chewco/JEDI
• E)LJM3

Understand the impact of sunk costs and why they are excluded from capital budgeting analysis.

Recognize the significance of the Capital Cost Allowance (CCA) system and its effects on cash flows and tax liabilities.

Comprehend the various methods of risk assessment and their implications on capital budgeting decisions.

Gain insight into the importance of externalities and their impact on project valuation.

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Definitions:

Retirement Savings

Funds accumulated for retirement, often involving tax advantages, through vehicles such as 401(k) plans, IRAs, or annuities.

AGI

Adjusted Gross Income, an individual's total gross income minus specific deductions, used in the United States tax system to determine taxable income.

Dependent Daughters

This term is not an official tax term but generally refers to daughters who qualify as dependents on someone's tax return due to financial support and other IRS criteria.

AGI

Adjusted Gross Income, which is gross income minus allowable deductions, used to determine taxable income on an individual's federal income tax return.