An All Equity Firm Has Some Risk Inherent in Its

question 43

True/False

An all equity firm has some risk inherent in its operations.When the firm decides to finance some of its operations with debt,it exposes itself to financial risk and it increases its business risk.

Evaluate economic definitions and statements for their validity and applicability.

Recognize the importance of opportunity cost in economic decision-making.

Grasp the foundational aspects of economic theory and the economic way of thinking.

Understand the distinction between positive and normative economic statements through examples.

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Definitions:

Modified Accelerated Cost Recovery System (MACRS)

A method of depreciation applied in the United States that allows for faster write-offs of assets to encourage investment.

Class Life

The expected useful lifetime of a fixed asset, which determines the depreciation rate for tax and accounting purposes.

Depreciation

The accounting process of allocating the cost of a tangible asset over its useful life to reflect its decrease in value over time.

After-Tax Cash Flow

After-tax cash flow is the net cash flow generated from business activities after accounting for taxes, indicating the actual cash a company has on hand after tax obligations.