A Firm Purchases an Asset for $50,000 and Estimates That

question 5

Multiple Choice

A firm purchases an asset for $50,000 and estimates that it will have a useful life of five years and a salvage value of $5,000.Under the straight-line method,the depreciation expense for the first year of the asset's useful life is

• A) $9,000.
• B) $18,000.
• C) $10,000.
• D) $20,000.

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Definitions:

Expected Return

Expected return is the anticipated value or profit generated by an investment in the future, considering the potential risks and rewards.

Market Portfolio

A theoretical portfolio comprising all assets in the market, with each asset weighted by its market capitalization, representing the entire stock market's performance.

Risk-free Rate

The rate of return on an investment with zero risk, typically based on government bonds.

Dividend Increase

A company's decision to raise the amount of dividends paid to its shareholders, often viewed as a positive signal of the company's profitability and future prospects.