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MCQ

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › MCQ

  • This topic has 1 reply, 2 voices, and was last updated 9 years ago by John Moffat.
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    Posts
  • December 10, 2015 at 5:15 pm #290389
    David
    Member
    • Topics: 14
    • Replies: 27
    • ☆

    Which of the following statements is correct?
    A Tax allowable depreciation is a relevant cash flow when evaluating borrowing to buy compared to leasing as a
    financing choice
    B Asset replacement decisions require relevant cash flows to be discounted by the after-tax cost of debt
    C If capital is rationed, divisible investment projects can be ranked by the profitability index when determining the
    optimum investment schedule
    D Government restrictions on bank lending are associated with soft capital rationing

    Both A and C are correct right?
    A because tax implications are relevant
    and C is correct as well
    :/

    December 10, 2015 at 7:43 pm #290553
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    A is not correct, because the tax allowable depreciation itself is not a cash flow. (the tax effect of it is, but not the depreciation itself).

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