The Term Capitalization Refers to the Conversion of a Future

question 40

True/False

The term capitalization refers to the conversion of a future income stream into a present value, and it is a
term often used by business appraisers when future income or cash flows are not expected to grow or to grow at a constant rate.

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Definitions:

Accumulated Depreciation

The aggregate depreciation cost that has been accounted for a particular asset since its first operational use.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life for accounting purposes, reflecting wear and tear.

Salvage Value

The predicted value that an asset retains at the end of its service period.

Straight-Line Depreciation

Straight-line depreciation is a method of allocating the cost of a fixed asset evenly over its useful life, assuming a constant rate of depreciation each year.