The U.S. tax laws provide for the depreciation of equipment based on original cost. Yet owing to

Question:

The U.S. tax laws provide for the depreciation of equipment based on original cost. Yet owing to substantial inflation, the replacement cost of equipment is often much greater than the original cost. What effect, if any, does this have on a firm's ability to buy new equipment to replace old equipment?

Depreciation
Depreciation is an important concept in accounting. By definition, depreciation is the wear and tear in the value of a noncurrent asset over its useful life. In simple words, depreciation is the cost of operating a noncurrent asset producing...