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:

Unsubstitutable

Describes a good or service that cannot be replaced or substituted by another due to its unique characteristics or the specific needs it meets.

Supplier Power

The influence a supplier has over the price and availability of its products, affecting the market competitiveness.

Less Concentrated

Refers to an industry or market where power and resources are spread out among many competitors, reducing the level of competition.

Vital Inputs

Crucial resources or components required for the production process or for providing a service.