Which of the Following Statements Is CORRECT

question 57

Multiple Choice

Which of the following statements is CORRECT?

• A) Using accelerated depreciation rather than straight line would normally have no effect on a project's total projected cash flows but it would affect the timing of the cash flows and thus the NPV.
• 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 (e.g. ,straight line or accelerated)for stockholder reporting and tax purposes.
• D) Since depreciation is not a cash expense,it has no effect on cash flows and thus no effect on capital budgeting decisions.
• E) Under accelerated depreciation,higher depreciation charges occur in the early years,and this reduces the early cash flows and thus lowers a project's projected NPV.

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Definitions:

Household Wealth

The total value of all financial and non-financial assets owned by members of a household minus any liabilities.

Consumption Function

An economic formula that expresses the relationship between total consumption and gross national income.

Price Level

An index that measures the average of prices for goods and services in an economy over a period, often used to assess inflation or deflation.

Disposable Income

The leftover money for households to use in savings and for buying things, once income taxes have been considered.