Why Does the Tax Amount Need to Be Adjusted When

Multiple Choice

Why does the tax amount need to be adjusted when valuing a firm using the cash flow from assets approach?

A) The tax effect of the dividend payments must be eliminated.
B) Only straight-line depreciation can be used when computing taxes for valuation purposes.
C) Taxes must be computed for valuation purposes based solely on the marginal tax rate.
D) The tax effect of the interest expense must be removed.
E) The taxes must be computed for valuation purposes based on the average tax rate for the past ten years.