Ch 3 Homework Text

Ch 3 Homework Text - The increased depreciation and...

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D) I would prefer to have Congress double the depreciation and amortization expense, because that would increase the operating costs, which would decrease the net income (decreasing the taxes paid), but increase the net cash. From a finance perspective, the increase in net cash gives The Phillies Corporation more power. E) Doubling of the depreciation and amortization expenses reduces the net income, which reduces the earnings per share, which would act as a depression force on the stock price.
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Unformatted text preview: The increased depreciation and amortization lowers the market value of the Phillies Corporation’s asset, which reduces the value of the company. However, lending companies usually look at the EBITDA before changing their opinion on a company’s strength pay back money, so it would not affect their underwriting decisions....
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