Correct answer: A

Due to the lowering of the U.S. federal income tax rate for C-corps, the value of the tax shield from the deduction of interest expense is also reduced, thereby increasing the company’s after-tax cost of debt and thus increasing the company’s WACC.  (The result of the TCJA on the equity risk premium is unclear at this time.)

Correct answer: B

A is incorrect, as the interest expense limitation increases your after-tax cost of debt. C is incorrect as this it has no direct relationship with the deductibility of interest expense.

Correct answer: D

Correct answer: D

Correct answer: D

Correct answer: B

Given a buyer will be able to immediately deduct 100 percent of the target’s qualifying Section 167(k) property, buyers are likely to push even harder to structure mergers/acquisitions as asset deals. A stock deal would result in the acquired Section 167(k) property being depreciated on a carry-over basis (i.e., no bonus depreciation, and as with any traditional stock deal, no step-up).

Correct answer: D

Correct answer: C

The company’s effective tax rate will increase because income tax expense will increase but pre-tax income is un-changed.  Answer a is incorrect because the TCJA eliminated the exception/carve out for performance-based compensation. Answer b is incorrect, as due to more compensation falling under Section 162(m), arguably it is more likely for executive compensation to be reduced, not increased, due to the reduced tax deductibility.

Correct answer: D

B is true because the tax advantage of 100 percent bonus deprecation on Section 167(k) property incentivizes investment in capital expenditures. Additionally, the 100 percent bonus depreciation provision begins sunsetting in 2023, and is eliminated in 2028. Answer C is also true because employers may want to provide participation in the benefits from the increase in the after-tax cash flow due to the lower U.S. federal income tax rate (for C-corps) under the TCJA. Many public companies have already announced one-time bonuses.

Correct answer: D