When computing the adjusted cash flow from assets, the tax amount is calculated as:
A) EBT(TC).
B) (EBT − Depreciation)(TC).
C) (EBIT + Depreciation − Change in NWC − Capital spending)(TC).
D) EBIT(TC).
E) (EBIT − Depreciation − Change in NWC − Capital spending)(TC).

Question

Quizplus · Accepted Answer

The tax amount is calculated on Earnings Before Interest and Taxes (EBIT) times the tax rate (TC), which is represented as EBIT(TC). This is because taxes are calculated on earnings before the deduction of interest expenses.

When Computing the Adjusted Cash Flow from Assets, the Tax