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A project will incur $500 in shutdown costs the year after the completion of the project.  The tax rate is 25%.  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)? Question 4Answer a. $-125 b. $-105 c. $105 d. $125

A project will incur $500 in shutdown costs the year after the completion of the project.  The tax rate is 25%.  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)? Question 4Answer a. $-125 b. $-105 c. $105 d. $125

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A project will incur $500 in shutdown costs the year after the completion of the project.  The tax rate is 25%.  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)?

Question 4Answer

a.
$-125
b.
$-105
c.
$105
d.
$125
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