In Calculating Depreciation, Residual Value Is

question 154

Multiple Choice

In calculating depreciation, residual value is

• A)the fair value of the asset on the date of acquisition.
• B)subtracted from accumulated depreciation to determine the asset's depreciable cost.
• C)an estimate of the asset's value at the end of its useful life.
• D)ignored in all the depreciation methods.

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Definitions:

M&M Proposition II

A theory proposing that the cost of equity increases as a company increases its leverage, due to the riskier equity stream.

Debt-Equity Ratio

A ratio assessing the comparative financing from equity and debt for a company’s assets.

Cost of Equity

The return a company theoretically pays to its equity investors, conceived as a compensation for taking on the risk of investing.

Break-Even Point

The point at which total revenues equal total expenses, and the business neither makes a profit nor incurs a loss.