Which of the Following Statements Is CORRECT

question 40

Multiple Choice

Which of the following statements is CORRECT?

• A) Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 3 years or longer.
• B) If firms use accelerated depreciation, they will write off assets slower than they would under straight-line depreciation, and as a result projects' forecasted NPVs are normally lower than they would be if straight-line depreciation were required for tax purposes.
• C) If they use accelerated depreciation, firms can write off assets faster than they could under straight-line depreciation, and as a result projects' forecasted NPVs are normally lower than they would be if straight-line depreciation were required for tax purposes.
• D) If they use accelerated depreciation, firms can write off assets faster than they could under straight-line depreciation, and as a result projects' forecasted NPVs are normally higher than they would be if straight-line depreciation were required for tax purposes.
• E) Since depreciation is not a cash expense, and since cash flows and not accounting income are the relevant input, depreciation plays no role in capital budgeting.

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Definitions:

Payroll Taxes

Charges assessed on employers and their workers, based on a percentage of the compensation paid to employees.

Worker

An individual who performs services or labor, usually in exchange for compensation, within an economy.

Employer

An individual or organization that hires and pays people to perform specific jobs.

Public Finance

The study of government revenue, expenditure, and adjustment of government budgets and its effect on the economy.