If a Firm Cannot Use Available Tax Shields in the Year

question 29

Multiple Choice

If a firm cannot use available tax shields in the year those tax shields are available,what happens to the benefits of those tax shields?

• A)The benefits are not lost or reduced because they can be used to offset or reduce future taxable income.
• B)The benefits of the tax shields are always lost and cannot be taken advantage of in future years.
• C)The benefits are allocated to other firms in the industry.
• D)The benefits provided by the tax shields are either lost because the tax shield benefits expire or are reduced because the benefits are taken in later years.

Recognize the assumptions underlying the F-test for equality of variances.

Know the symmetry properties of the F-distribution.

Apply the concept of F-distribution in constructing confidence intervals and calculating p-values.

Recognize when alternative statistical tests (z-test, t-test) are not appropriate for comparing variances.

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Definitions:

Credit Default Swap

A financial derivative allowing an investor to "swap" or offset their credit risk with that of another party.

Financial Risk

Financial risk encompasses the possible loss of financial assets, liabilities, or financial failure due to variables like currency fluctuations, interest rate changes, and funding challenges.

Capital Structure

The mix of debt and equity maintained by a firm.

Exchange Rate Risk

The risk related to having international operations in a world where relative currency values vary.