Martin Company's Building Has a 20-Year Useful Life and a Residual

question 166

Multiple Choice

Martin Company's building has a 20-year useful life and a residual value equal to 20% of the building's original cost.If the double-declining balance method is used,what depreciation rate would be used?

• A)4.5%
• B)5%
• C)9%
• D)10%

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Definitions:

Systematic Risk Factors

External risks that affect an entire market or asset class, and cannot be mitigated through diversification.

CAPM

Capital Asset Pricing Model; a model that describes the relationship between risk and expected return and that is used in the pricing of risky securities.

Arbitrage Pricing Theory

A financial model that estimates the price of securities by considering the relationship between their expected returns and macroeconomic factors.

Single Market Index

An index that measures the performance of a specific market segment or region.