Corporate Finance: The Core
3rd Edition
ISBN: 9780273792161
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 8.4, Problem 1CC
Summary Introduction
To explain: The advantages for a company to utilize the most accelerated
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Students have asked these similar questions
a. For reporting purposes, management prefers higher
profit; for tax purposes, lower taxable income is desired.
To meet these goals, firms often use different methods
of depreciation for tax and reporting purposes. Which
depreciation method is best for reporting and which for
tax purposes in the short run? Why?
Which depreciation method is most common for financial reporting? Which depreciation method is most common for tax reporting? Why do companies choose these methods?
How does depreciation give tax benefits?
What are the advantages of Internal Financing?
Chapter 8 Solutions
Corporate Finance: The Core
Ch. 8.1 - How do we forecast unlevered net income?Ch. 8.1 - Prob. 2CCCh. 8.1 - Prob. 3CCCh. 8.2 - Prob. 1CCCh. 8.2 - What is the depreciation tax shield?Ch. 8.3 - Prob. 1CCCh. 8.3 - Prob. 2CCCh. 8.4 - Prob. 1CCCh. 8.4 - What is the continuation or terminal value of a...Ch. 8.5 - Prob. 1CC
Ch. 8.5 - How does scenario analysis differ from sensitivity...Ch. 8 - Pisa Pizza, a seller of frozen pizza is...Ch. 8 - Kokomochi is considering the launch of an...Ch. 8 - Home Builder Supply, a retailer in the home...Ch. 8 - Hyperion, Inc. currently sells its latest...Ch. 8 - Prob. 5PCh. 8 - Prob. 6PCh. 8 - Castle View Games would like to invest in a...Ch. 8 - Prob. 9PCh. 8 - Prob. 10PCh. 8 - Prob. 11PCh. 8 - A bicycle manufacturer currently produces 300,000...Ch. 8 - Prob. 13PCh. 8 - Prob. 14PCh. 8 - Prob. 15PCh. 8 - Prob. 16PCh. 8 - Prob. 17PCh. 8 - Prob. 18PCh. 8 - Prob. 20PCh. 8 - Prob. 21P
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- Discuss the difference between the straight-line method of depreciation and the accelerated methods. Why do companies use different depreciation methods for tax reporting and financial reporting?arrow_forwardIn which situation does the tax depreciation allow the firms to defer paying income taxes?arrow_forwardThe faster an asset can be depreciated, according to IRS rules, the greater a company's after-tax profits. Is this true or false?arrow_forward
- Illustrate the significance of depreciation and income taxes?arrow_forwardWhat are the benefits of calculating depreciation differently for financial reports and for tax purposes?arrow_forwardWhat is a modified accelerated cost recovery system(MACRS)? Speculate as to why this system is nowrequired for tax purposes.arrow_forward
- How is a business activity distinguished from an investment activity? why is this distinction important for the purpose of calculating federal income taxes? What types of losses may potentially be characterized as passive losses?arrow_forwardExplain when a firm may recognize a deferred tax asset under SFAS No. 109. Howshould deferred tax assets that are not expected to be realized be accounted for?arrow_forwardWhat is depreciation and amortization? What's the difference? It is an accounting concept that has an indirect impact on cash flow as it is deductible for tax purposes and lowers the overall amount of taxes paid for that period. Therefore, it does impact or lower cash outflows for taxes. That is called the tax shield of depreciation and amortization. Over the course of my career, companies have increased their percentage of intangible property that must be amortized. Now, it is very common where companies will have little property, plant and equipment, but lots of intangible property. Why?arrow_forward
- Consider the following income statement: $ 510,944 332,416 75,600 Sales Costs Depreciation Таxes 25% Calculate the EBIT. EBIT Calculate the net income. Net incomearrow_forwardIf a company wanted to take advantage of depreciation expenses, how would this company accomplish this? What would be the advantages? Are there any disadvantages?arrow_forwardWhy do deferred tax assets arise? Explain your answer with suitable example.arrow_forward
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