A Start-Up Firm Is Making an Initial Investment in New

question 83

Multiple Choice

A start-up firm is making an initial investment in new plant and equipment. Assume that currently its equipment must be depreciated on a straight-line basis over 10 years, but now the company is allowed to depreciate the equipment over 7 years. Which of the following would occur in the year following the change?

• A) The firm's operating income (EBIT) would increase.
• B) The firm's net cash flow would increase.
• C) The firm's tax payments would increase.
• D) The firm's reported net income would increase.

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Definitions:

Reaction Time

The duration it takes for an individual to respond to a stimulus.

Schemas

In psychology, schemas are cognitive structures that help individuals organize and interpret information, based on their accumulated knowledge and experience.

Intelligence

The capacity to learn, understand, and apply knowledge, solve problems, and adapt to new situations.

SES

Short for Socioeconomic Status, a measure of an individual's or family's economic and social position relative to others, based on income, education, and occupation.