The Use of Accelerated Versus Straight-Line Depreciation Causes Net Income

question 13

True/False

The use of accelerated versus straight-line depreciation causes net income reported to stockholders to be lower, and cash flows higher, during every year of a project's life, other things held constant.

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Definitions:

Preemptive Right

A shareholder’s right to maintain their proportional ownership in a company by being able to buy additional shares before the company offers them to the public.

Proportional Ownership

Holding a portion of an entity that corresponds to the percentage of total shares owned.

Seasoned Equity Offering

The process by which companies with publicly traded shares issue additional equity to investors, usually to raise capital.

Dilution

Occurs when a company issues more shares, reducing the ownership percentage of existing shareholders.