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:

Goodwill

An intangible asset that arises when a business is purchased for more than the fair value of its net identifiable assets, representing future economic benefits arising from non-physical assets.

Acquisition Fair Value

The price that would be paid to acquire an asset or the amount received to assume a liability during a business combination.

Business Combination

The coming together of separate entities or businesses into one reporting entity through a variety of transactions such as mergers or acquisitions.

Equity Securities

Equity securities are financial instruments that signify ownership in a company or an entity, and represent a claim on part of its assets and earnings.