Which of the Following Statements Is CORRECT

question 49

Multiple Choice

Which of the following statements is CORRECT?

• A) Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 5 years or longer.
• B) Corporations must use the same depreciation method for both stockholder reporting and tax purposes.
• C) Using accelerated depreciation rather than straight line normally has the effect of speeding up cash flows and thus increasing a project's forecasted NPV.
• D) Using accelerated depreciation rather than straight line normally has no effect on a project's total projected cash flows nor would it affect the timing of those cash flows or the resulting NPV of the project.
• E) Since depreciation is a cash expense, the faster an asset is depreciated, the lower the projected NPV from investing in the asset.

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Definitions:

Paid-In Capital

Funds raised by a company from investors through the issuance of stock, excluding any amounts derived from retained earnings.

Fair Market Value

The price that property would sell for on the open market between a willing buyer and a willing seller.

Stockholders' Equity

Represents the equity stake currently held on a company's balance sheet by its shareholders, often calculated as total assets minus total liabilities.

Paid-In Capital

refers to the funds received from shareholders in exchange for shares of stock, representing investment directly into the company.