Why Is It Likely That Firms Would Use Straight-Line Depreciation

question 32

Multiple Choice

Why is it likely that firms would use straight-line depreciation methods for depicting project analysis to shareholders or lenders, if such choice were possible?

• A)it increases the NPV of the project.
• B)it decreases the tax liability of the project.
• C)it mirrors the market value of the assets.
• D)it allows asset balances to decline more slowly.

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Definitions:

Minimum-Contacts Standard

A legal standard that determines whether it is fair for a court in one jurisdiction to assert its authority over a defendant from another jurisdiction.

Business Firm

An organization engaged in commercial, industrial, or professional activities with the purpose of generating profit.

Large Corporations

Substantial business entities with significant operational scale, usually involving multi-national operations and a large number of employees.

Jurisdiction

The legal authority granted to a court or governmental entity to make decisions and enforce laws.