(12A) Which of the Following Statement Completions Is NOT CORRECT

question 18

Multiple Choice

(12A) . Which of the following statement completions is NOT CORRECT? For a profitable firm, when MACRS accelerated depreciation is compared to straight-line depreciation, MACRS accelerated allowances produce

• A) Higher depreciation charges in the early years of an asset's life.
• B) Larger cash flows in the earlier years of an asset's life.
• C) Larger total undiscounted profits from the project over the project's life.
• D) Smaller accounting profits in the early years, assuming the company uses the same depreciation method for tax and book purposes.
• E) Lower tax payments in the earlier years of an asset's life.

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Definitions:

Multifactor APT

Multifactor APT, or Arbitrage Pricing Theory, is a model that describes the expected return on a financial asset as a linear function of various macroeconomic factors or theoretical market indexes.

Macro Factors

Economic variables that affect a wide range of assets and securities including inflation, interest rates, economic growth, and political stability.

Factor Portfolio

A portfolio constructed to have a high sensitivity to a specific factor or factors, used to capture returns associated with those factors.

Well-Diversified

A portfolio strategy involving the mix of different investments to reduce exposure to risk.