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Regardingexpensinganasset'scostimmediatelyversus capitalizingthecostanddepreciatingitovertime:Allelse thesame,givenachoice,ataxpayingfirmwould thesame,givenachoice,ataxpayingfirmwould generallypreferto capitalizethecostanddepreciate,becausethiswill makethecurrentyear'snetincomehigher. capitalizethecostanddepreciate,becauseitisbest toextendthedepreciationtaxshieldintothefuture asmuchaspossible. expensetheassettocapturethetaxshield immediatelyandtherebymaximizethepresentvalue ofthetaxshield. expensetheassettomaximizethecurrentyear'snet income. noneoftheabove.

Regardingexpensinganasset'scostimmediatelyversus capitalizingthecostanddepreciatingitovertime:Allelse thesame,givenachoice,ataxpayingfirmwould

thesame,givenachoice,ataxpayingfirmwould generallypreferto capitalizethecostanddepreciate,becausethiswill makethecurrentyear'snetincomehigher. capitalizethecostanddepreciate,becauseitisbest toextendthedepreciationtaxshieldintothefuture asmuchaspossible.

expensetheassettocapturethetaxshield immediatelyandtherebymaximizethepresentvalue ofthetaxshield.

expensetheassettomaximizethecurrentyear'snet income. noneoftheabove.

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