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A firm has after-tax cash flow from operations equal to $100,000. Operating working capital increased by $20,000, and the firm purchased $30,000 of fixed assets. The firm's free cash flow was Classify the following transaction according to its correct cash flow activity: Issuance of corporate mortgage. a. Operating b. Investing c. Financing d. Not Applicable A project will incur $700 in shutdown costs the year after the completion of the project. The tax rate is 35%. What is the tax shield resulting from these tax-deductible shutdown costs (where a negative number means a cash outflow and a positive number means an incremental cash inflow)?

A firm has after-tax cash flow from operations equal to $100,000. Operating working capital increased by $20,000, and the firm purchased $30,000 of fixed assets. The firm's free cash flow was Classify the following transaction according to its correct cash flow activity: Issuance of corporate mortgage. a. Operating b. Investing c. Financing d. Not Applicable A project will incur $700 in shutdown costs the year after the completion of the project. The tax rate is 35%. What is the tax shield resulting from these tax-deductible shutdown costs (where a negative number means a cash outflow and a positive number means an incremental cash inflow)?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A firm has after-tax cash flow from operations equal to $100,000. Operating working capital increased by $20,000, and the firm purchased $30,000 of fixed assets. The firm's free cash flow was Classify the following transaction according to its correct cash flow activity: Issuance of corporate mortgage. a. Operating b. Investing c. Financing d. Not Applicable A project will incur $700 in shutdown costs the year after the completion of the project. The tax rate is 35%. What is the tax shield resulting from these tax-deductible shutdown costs (where a negative number means a cash outflow and a positive number means an incremental cash inflow)?
Transcribed Image Text:A firm has after-tax cash flow from operations equal to $100,000. Operating working capital increased by $20,000, and the firm purchased $30,000 of fixed assets. The firm's free cash flow was Classify the following transaction according to its correct cash flow activity: Issuance of corporate mortgage. a. Operating b. Investing c. Financing d. Not Applicable A project will incur $700 in shutdown costs the year after the completion of the project. The tax rate is 35%. What is the tax shield resulting from these tax-deductible shutdown costs (where a negative number means a cash outflow and a positive number means an incremental cash inflow)?
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