The Tax Shield Approach to Computing the Operating Cash Flow,given

question 63

Multiple Choice

The tax shield approach to computing the operating cash flow,given a tax-paying firm:

• A)ignores both interest expense and taxes.
• B)separates cash inflows from cash outflows.
• C)considers the changes in net working capital resulting from a new project.
• D)is based on the fact that depreciation does not affect the operating cash flows.
• E)recognizes that depreciation creates a cash inflow.

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Definitions:

Life Estate

A property interest that lasts for the lifetime of a specific individual, after which it transfers to another designated party.

Deteriorate

Refers to the process of becoming progressively worse or the decline in quality or condition.

Duty To Warn

The legal obligation to inform others about potential dangers or risks associated with a product, property, or situation.

Reasonable Buyer

A hypothetical person in the marketplace considered to be adequately informed, cautious, and not under any pressure to make a purchase.