This is from schweser concept checkers Reading #37 question 13.
qn) An analyst is comparing a firm to its competitors. The firm has a deferred tax liability and is expected to have capital expenditures decline in the future. How should the liability be treated for analytical purposes?
a) It should be treated as equity at its full value.
b) It should be treated as liability at its full value.
c) The present value should be treated as a liability with the remainder being treated as equity.
I thought the answer was b) since the capital expenditures goes down, the effect would reverese, but schweser has it as c). Could someone explain this ?
Thanks. |