The Present Value of a Perpetual Tax Shield Increases as the Firm's

question 26

Multiple Choice

The present value of a perpetual tax shield increases as the firm's tax rate _____ and the amount of principal _____.

• A) increases; increases
• B) increases; decreases
• C) decreases; decreases
• D)decreases; increases

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Definitions:

Rawhide Tanning

The process of treating raw hides and skins with chemical solutions to produce leather.

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.