Question
Which of the following statements is CORRECT? a. If firms use accelerated depreciation, they will write off assets slower than they would under straight-line depreciation,
Which of the following statements is CORRECT?
| a. | If firms use accelerated depreciation, they will write off assets slower than they would under straight-line depreciation, and as a result projects' forecasted NPVs are normally lower than they would be if straight-line depreciation were required for tax purposes. | |
| b. | If they use accelerated depreciation, firms can write off assets faster than they could under straight-line depreciation, and as a result projects' forecasted NPVs are normally lower than they would be if straight-line depreciation were required for tax purposes. | |
| c. | Since depreciation is not a cash expense, and since cash flows and not accounting income are the relevant input, depreciation plays no role in capital budgeting. | |
| d. | If they use accelerated depreciation, firms can write off assets faster than they could under straight-line depreciation, and as a result projects' forecasted NPVs are normally higher than they would be if straight-line depreciation were required for tax purposes. | |
| e. | Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 3 years or longer. |
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
