Two Assets, a and B, Are Purchased for the Same

question 61

Multiple Choice

Two assets, A and B, are purchased for the same price. Each loses 10% of its value in the first year. Subsequently, the value of A continues to decline in the same way by declining-balance depreciation, while the value of B continues to decline in the same way by straight-line depreciation. Which will have the greater book value in five years time?

• A)A
• B)B
• C)Their book values will always be equal.
• D)Their book values will generally be different, but they are exactly equal at the end of the fifth year.
• E)It is impossible to say without knowing the MARR.

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