Chapter 3 Flashcards by Mirza Waleed Baig | Brainscape

Q

Depreciation reduces net income and dividends payment?

A

yes

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Q

Depreciation also reduces tax payment?

A

yes

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Q

Which company will have higher cash-flow. The one who amortise or the one who doesn’t?

A

The one who doesn’t

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Q

Retained earnings formula?

A

Earnings - dividends

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Q

Tax shield formula?

A

Depreciation * Marginal tax rate

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