Deduction of interest expense in the calculation

Assignment Help Finance Basics
Reference no: EM133123127

Suppose you are the Teaching assistant for FINA2710. A student in the class is very puzzled by how operating cash flows are calculated. He does not understand why he needs to add the amount of depreciation back to after-tax earnings to get total cash flows. He also notes that there is no deduction of interest expense in the calculation, and thus he thinks the tax burden is understated. Provide your explanation.

Reference no: EM133123127

Questions Cloud

How much will you have at the end of year 7 : You are expecting to deposit the following amount at the end of each year for the next 5 years in a savings account:
6-month forward price for a share of mu : Micron Technologies (MU) is currently trading at $81.93/share (S(0) = $81.93). A 6-month risk-free zero coupon bond with a $100 face value trades at $98.51. Ass
Engaging in a risk profile to weigh various insurance option : Engaging in a risk profile to weigh various insurance options is part of which phase of risk management?
Explain the cash conversion cycle : Explain the cash conversion cycle (CCC). Describe the CCC for your employer or company in an industry in which you're interested. What are some specific things
Deduction of interest expense in the calculation : Suppose you are the Teaching assistant for FINA2710. A student in the class is very puzzled by how operating cash flows are calculated. He does not understand w
Find the periodic payment : A loan of P 40,000 is to be amortized by equal payments at the end of each quarter for 1 year and 6 months. Find the periodic payment
Calculation of individual costs and wacc : Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted a
What is the one-year forward price : Consider a commodity that is used in production to manufacture other products. You can buy the commodity, but you cannot short sell it because producers who hav
What is the balance in the margin account : An investor takes a long position in two gold futures contracts. Each gold futures contract is for delivery of 100 ounces of gold. The initial futures price is

Reviews

Write a Review

Finance Basics Questions & Answers

  Confidence interval estimate of the population mean

a. Conduct the hypothesis test using a 0.05 level of significance and determine whether or not the company's claim is supported? b. Construct a 95% confidence Interval estimate of the population mean?

  How many units should the firm produce

The company likes to maintain 30 percent of unit sales for each month in ending inventory. Beginning inventory is 21,000 units.

  What key problems were identified with basel ii

What key problems were identified with Basel II?

  What is the company wacc-cleen power co

You are given the following information for Cleen Power Co. Assume the company's tax rate is 40 percent. Debt:7,000 7.4 percent coupon bonds outstanding

  What is the tax advantage of the merger each year

What is the tax advantage of the merger each year for Reilly? What is the tax advantage of the merger each year for Webster? What is the maximum cash price each interested firm would be willing to pay for Hahn Textiles?

  What is the market price of face value bond

Chocolate and Rum, Inc. offers a 7% coupon bond with semiannual payments and a yield to maturity of 8%. What is the market price of a $1,000 face value bond

  Why the note is selling for price different from its face

1. The Treasury offers a $10,000 face value 10-year government note with an annual coupon rate of 1.00% (paid semi-annually) to the market.

  Describe the time value of money concept

What are the advantages of having part of your paycheck automatically deposited in a savings or investment account?

  Future value of an ordinary annuity

How does the future value of an annuity due compare with the future value of an ordinary annuity?

  What proportion of the following investors wealth would

every investor in the capital asset pricing model owns a combination of the market portfolio and a riskless asset.

  Kleener co acquired a new delivery truck at the beginning

kleener co. acquired a new delivery truck at the beginning of its current fiscal year. the truck cost 52000 and has an

  Why is valuation a central piece in the finance profession

How much control do you think you have over your own retirement savings? In other words, after all said in done in above, do you really think you can reasonably count on your retirement savings at the time of your retirement? Yes or no and explai..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd