The Book Value of an Asset Is Primarily Used to Compute

question 12

Multiple Choice

The book value of an asset is primarily used to compute the:

• A)annual depreciation tax shield.
• B)amount of cash received from the sale of an asset.
• C)amount of tax saved annually due to the depreciation expense.
• D)amount of tax due on the sale of an asset.
• E)change in depreciation needed to reflect the market value of the asset.

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Definitions:

Rate of Return

The percentage of net gain or loss on an investment over a specified time period.

Cash Flows

The total amount of money being transferred into and out of a business, particularly affecting the operational activities.

Annual Payment

A recurring payment made once a year for a variety of purposes, including loan repayments, leases, and annuities.

Perpetuity

A type of annuity that pays a fixed amount of money to an individual indefinitely, without a termination date.