Which of the Following Statements Is CORRECT

question 23

Multiple Choice

Which of the following statements is CORRECT?

• A)Since depreciation is a cash expense, the faster an asset is depreciated, the lower the projected NPV from investing in the asset.
• B)Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 5 years or longer.
• C)Corporations must use the same depreciation method for both stockholder reporting and tax purposes.
• D)Using accelerated depreciation rather than straight line normally has the effect of speeding up cash flows and thus increasing a project's forecasted NPV.
• E)Using accelerated depreciation rather than straight line normally has no effect on a project's total projected cash flows nor would it affect the timing of those cash flows or the resulting NPV of the project.

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Definitions:

Paid-in Capital

The amount of money that a company has received from shareholders in exchange for shares of stock, beyond the par value of the shares.

Retained Earnings

The portion of a company's profits that is kept or retained and not paid out as dividends to shareholders, often used for reinvestment in the business or to pay off debt.

Preferred Stock

A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock, often with fixed dividends.

Common Stock

A type of equity security that represents ownership in a corporation, entitling the holder to dividends and, in many cases, voting rights.