A Start-Up Firm Is Making an Initial Investment in New

question 38

Multiple Choice

A start-up firm is making an initial investment in new plant and equipment. Currently equipment is depreciated on a straight line basis over 10 years. Assume that Congress is considering legislation which will allow the corporation to depreciate the equipment over 7 years. If the legislation becomes law, and the firm implements the 7-year depreciation basis, which of the following will occur?

• A) The firm's tax payments will increase.
• B) The firm's net income will increase.
• C) The firm's taxable income will increase.
• D) The firm's net cash flow will increase.
• E) The firm's operating income (EBIT) will increase.

---

Definitions:

Constitution

The fundamental principles and established precedents according to which a state or other organization is governed.

Ordinary Voters

Individuals without significant political influence or power who participate in elections to choose their government representatives.

Three-Fifths Clause

A compromise found in the U.S. Constitution stating that for purposes of representation in Congress, every five slaves would be counted as three individuals.

White South

Refers to the sociopolitical and cultural milieu of the southern United States, historically dominated by white Americans, especially in contexts involving racial segregation and Confederate heritage.