The Interest Tax Shield Has No Value When a Firm

question 12

Multiple Choice

The interest tax shield has no value when a firm has:
I.no taxable income.
II.debt-equity ratio of 1.
III.zero debt.
IV.no leverage.

• A) I and III only
• B) II and IV only
• C) I, III, and IV only
• D) II, III, and IV only
• E) I, II, and IV only
• F) None of the above.

Understand the differences between variable costing and absorption costing and their impact on financial statements.

Apply principles of variable and fixed costs to solve for required sales to achieve targeted profits.

Analyze the effects of advertising and promotional activities on the break-even point and profitability.

Understand the basic concepts of process costing and how it differs from job order costing.

---

Definitions:

Divisible

Capable of being divided or separated into smaller parts without leaving a remainder.

Conditional Probability

The chance of a specific event happening when it is known that another event has occurred.

Multiplication Law

A principle used in probability that determines the likelihood of two independent events occurring together.

Addition Law

In probability, the rule that calculates the probability of the occurrence of at least one of two events.