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Corporate Finance to Pay for Taxes

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A) How would not having to pay taxes impact our future cash flows? Would the depreciation tax shield offset the actual tax cost? How would this impact a project's Net Profit Value (NPV)?

B) In what ways do operating risk and financial risk impact the required return (cost of capital) of a potential project?

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Solution Summary

The expert examines corporate finance. The expert determines how not having to pay taxes impacts the future cash flows. The deoreciation tax shields offsetting the actual cost are examined.

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Please see below for the complete explanation of the two questions.

Question A
Not having to pay taxes means higher free cash flows resulting from the project. This means therefore that future cash flows will ...

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