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COB 300B Exam | 115 Questions and Answers Verified 100% Correct
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COB 300B Exam | 115 Questions and Answers Verified 100% Correct
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COB 300B Exam | 115 Questions and AnswersVerified 100% Correct
Market Value Added (MVA) - ✔✔The difference between the market value and the book
value of a firm's common equity.
Economic Value Added (EVA) - ✔✔An estimate of a business's true economic profit for a
given year. It reflects the company's ability to generate value beyond the required return on its
capital.
Reason Why Accounting Statements are Insufficient - ✔✔Accounting statements do not
adequately evaluate managers' performance because they are based on historical costs and do
not reflect the current market values of the firm's assets or equity.
Relationship Between EVA and MVA - ✔✔EVA (Economic Value Added) and MVA (Market
Value Added) are related, as positive EVA on an annual basis helps to ensure that MVA is
positive.
What does a positive EVA mean? - ✔✔It indicates the firm is generating more profit than the
cost of capital, contributing to value creation.
MVA - ✔✔Applicable to the entire firm, reflecting the overall market value compared to
book value.
EVA - ✔✔Can be calculated not only for the whole firm but also on a divisional basis, making
it useful for assessing the performance of different parts of the organization.
Depreciation goes up - ✔✔When depreciation increases, it reduces taxable income and
lowers the company's earnings.
, Fixed assets go down - ✔✔As depreciation increases, the value of fixed assets on the balance
sheet decreases.
Net income goes down - ✔✔Higher depreciation reduces earnings before taxes, which leads
to a decrease in net income.
Tax payments go down - ✔✔Increased depreciation reduces taxable income, which lowers
the amount of taxes the company needs to pay.
Cash position goes up - ✔✔Although net income decreases, the company's cash position
improves because lower tax payments result in higher available cash.
Federal Income Tax System - ✔✔Individual Taxes and Corporate Taxes
What is the federal corporate income tax rate after the Tax Cuts and Jobs Act (TCJA) of 2017? -
✔✔21%
What is the average state corporate income tax rate? - ✔✔Around 5%
How is the business interest deduction limited from 2018 to 2021? - ✔✔Limited to 30% of
EBITDA
How is the business interest deduction limited after 2021? - ✔✔Limited to 30% of EBIT
What are the tax rates for individual income tax? - ✔✔Rates begin at 10% and rise to 37% for
single individuals.
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