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NEW QUESTION: 1
NEW QUESTION: 2
A depreciation tax shield is:
A. Caused by the fact that depreciation does not affect cash flow.
B. An after-tax cash outflow.
C. A reduction in income taxes.
D. The expense caused by depreciation.
Choice "b" is correct. Whenever depreciation protects income from taxation, it is known as a depreciation
Choice "a" is incorrect. A depreciation tax shield may result in after-tax cash inflow, but not outflow.
Choice "c" is incorrect, per above.
Choice "d" is incorrect. A depreciation tax shield is caused by the tax deductibility of the depreciation
expense, not by the fact that depreciation does not affect cash flow.
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