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Both
A) | TRUE |
B) | FALSE |
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- Why is the depreciation tax shield a component of analyzing investment decisions? O A. Depreciation causes a cash outflow that is added to determine net income. O B. Though no cash was paid out, depreciation was included on the tax return, which caused the company to pay taxes on the amount of depreciation. O C. Depreciation lowers cash outflows for income taxes paid. O D. Depreciation creates cash flows that do not appear on the income statement.Which of the following statements is CORRECT? O The more depreciation a firm reports, the higher its tax bill, other things held constant. O People sometimes talk about the firm's net cash flow, which is shown as the lowest entry on the income statement, hence it is often called "the bottom line." O Depreciation and amortization are not cash charges, so neither of them has an effect on a firm's reported profits. O Net cash flow (NCF) is often defined as follows: Net Cash Flow = Net Income + Depreciation and Amortization Charges. O Depreciation reduces a firm's cash balance, so an increase in depreciation would normally lead to a reduction in the firm's net cash flow......is the after tax cash flow generated by a business minus the cost of the capital it has deployed to generate that cash flow a. Net Present Value (NPV) a. Ob Economic value added (EVA) Oc. Internal Rate of Return (IRR) d. Discounted Cash Flow
- b. Disregard the assumptions in Part a. What is the depreciable basis? What are the annual depreciation expenses? c. Calculate the annual sales revenues and costs (other than depreciation). Why is it important to include inflation when estimating cash flows? d. Calculate annual net operating profit after sales (NOPAT). Then calculate the operating cash flows.Why do companies accelerate depreciation on their tax return but often use slower depreciation rates on their financial statements? a. to avoid taxes b. to postpone taxes c. to improve earnings d. to improve long term cashflowIf the accounting rate of return exceeds the required accounting rate of return, O A. invest in the capital asset. B. only invest if the payback period is also less than the required rate of return. O C. do not invest in the capital asset. OD. only invest if the payback period is also greater than the required rate of return.
- In calculating the incremental after-tax cash flows associated with a particular investment, the firm must consider many types of cash flows. Select the incremental cash flow types below that the firm would not incorporate directly into their incremental after-tax cash flow estimates. A) revenues B) operating costs C) sunk costs D) net working captial E) opportunity costs F) financing costs“Depreciation expenses have no effect on cash flows and, therefore, are not relevant in capitalexpenditure analysis.” Do you agree? Why or why not?1. In discounted cash flows method, the value of investment opportunities is highly dependent on the value that the asset will generate from now until the future. True False 2. Discounted cash flows analysis can be done by determining the present value of the Net Cash Flows of the investment opportunity. True False 3. The amount that should be included in determining the value of the asset is the amount of cash that will be available for the claims of the equity owners and creditors. True False 4. Relevance and reliability of information are important in financial modelling. True False 5. In financial modeling, the usual growth indicators used are inflation, population growth and GNP/GDP growth. True False 6. In financial modelling, you need the inflation to be used as driver for certain operating and capital expenditures. True False 7. The value of a firm's invested capital is Php300 million. Its return on invested capital is 12 percent, and its WACC is 10.5 percent. What is the…
- Adjusted present value technique is a technique that A) adjusts conventional present value for nonconstant cash inflows B) suggests separating tax savings from interest in the cash flows within the valuation process C) is used to value a project for a multinational corporation D) simply adjusts the conventional present value for nominal interestWhich of the following is not a typical cash inflow in capital investment: a. cash savings on regular expenses. b. salvage value of old machine. c. proceeds from financing. d. reduction in working capital.In terms of future value (FV) which of the following considerations is correct? Select one: O A. Consider only future cash flows as relevant factors O B. Consider only past cash flows as relevant factors O C. Consider past sales revenues and cost of sales as relevant factors O D. Consider future gross profit and net profits as relevant factors