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Elden [556K]
3 years ago
13

Why do we subtract depreciation in the calculation of EBIAT if we are going to add it back as the next step of the Free Cash Flo

w formula?
Business
1 answer:
vladimir1956 [14]3 years ago
3 0

Answer: Depreciation is tax deductible

Explanation:

Depreciation on assets is recognized by tax authorities as an expense that a business actually incurs so when the income statement is calculated, depreciation needs to be removed as the expense that it is so that taxes can be calculated on the profit.

Depreciation however, does not take actual cash from the company i.e the company does not actually pay anyone cash for depreciation like most other expenses. It needs therefore to be added back to the Free Cash Flow because the FCF deals with how much actual cash the company has which is something that Depreciation being a non-cash expense did not reduce.

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Windspire is starting a firm in the small-scale wind-generated power industry. This industry is still so new that no standard op
liq [111]

Answer:

Emerging

Explanation:

An emerging industry is a group of companies that is created around a new product or idea that is still in the early stages of development. An emerging industry consists of just a small number companies and is often centered around new technology. A example is the small wind generated power industry because wind is not a common source that is used for the generation of power.

4 0
3 years ago
Which is most true of an annual rate of 4% compounded quarterly? A) It is equivalent to 4.4% paid annually. B) It is equivalent
Artemon [7]

Answer:

D) It is equivalent to 4.06% paid annually

Explanation:

Since it is not talking about annuity and simple compound interest, therefore assuming investment value = $100 then interest will be as follows:

Interest for each quarter = \frac{4}{100} \times \frac{3}{12} = 1%

But this 1% will be paid on the compounded value

Interest at end of Quarter 1 = $100 X 1% = $1

Compounded value at end of Quarter 1 = $100 + $1 = $101

Interest at end of Quarter 2 = $101 X 1% = $1.01

Compounded value at end of Quarter 2 = $101 + $1.01 = $102.01

Interest at end of Quarter 3 = $102.01 X 1% = $1.0201

Compounded value at end of Quarter 3 = $102.01 + $1.0201 = $103.0301

Interest at end of Quarter 4 = $103.0301 X 1% = $1.030301

Compounded value at end of Quarter 4 = $103.0301 + $1.030301 = $104.060401

Now net return annually = $4.060401/$100 = 4.06%

Final Answer

D) It is equivalent to 4.06% paid annually

6 0
3 years ago
Denise has $13,424 in a savings account with the District 113 Teacher's Credit Union. While economic conditions have caused the
coldgirl [10]

Answer:

Explanation:

$120= the amount to pay for the shoe

$20 paid for the month

Balance to pay = $100

Then 3% interest rate on credit card = 3% of $100=$3

Therefore amount to pay = $3+$100=$103

7 0
2 years ago
In a perfectly competitive market in​ short-run equilibrium,​ _______. A. the price and quantity bought and sold in the market a
Thepotemich [5.8K]

Answer:

D. Market supply and market demand determine the price and quantity bought and sold in the market.

Explanation:

In perfectly competitive market, equilibrium price and quantity is determined at the point where the aggregate supply curve and aggregate demand curve intersect.

If either supply or demand changes, the supply/demand curve will shift to intersect the demand/supply curve at a new equilibrium point.

In other words, although both suppliers and buyers are price-takers they both influence price and quantity bought and sold,<em> at the aggregate level</em>.

4 0
3 years ago
Read 2 more answers
Suppose that a monopolist sells a product to men and women. If the firm sets a single price, the monopolist would produce 100,00
matrenka [14]

Answer:

Monopolist can charge a higher price from women.

Explanation:

A monopolist is producing 100,000 units of a product.  

The price of the product is $5 per unit.  

The price elasticity of demand for men at this price is -3.5.

The price elasticity for women, on the other hand, is -0.8.

This means that the men have a relatively elastic demand for the product. While on the other hand, women have relatively inelastic demand. This implies that if the price is increased the demand from women will not change by a greater proportion.  

While demand from men can change to a greater proportion because of a change in price.  

In this situation, the firm can charge a higher price from women. This is an example of third-degree price discrimination.

3 0
3 years ago
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