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.

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Definitions:

Thyroxine-binding Protein

A plasma protein that transports thyroxine, a hormone responsible for regulating metabolism, throughout the bloodstream.

Parathyroid Hormone

A hormone secreted by the parathyroid glands that regulates calcium levels in the blood.

Serum Levels

The concentration of substances in the clear liquid portion of the blood after coagulation.

Adrenocorticotropic Hormone

A hormone produced by the anterior pituitary gland that stimulates the adrenal cortex to release corticosteroid hormones.