Asymmetric Information Is a Universal Problem

question 62

Multiple Choice

Asymmetric information is a universal problem. This would suggest that financial regulations

• A)in industrial countries are an unqualified failure.
• B)differ significantly around the world.
• C)in industrialized nations are similar.
• D)are unnecessary.

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Definitions:

Depreciation Tax Shield

A reduction in taxable income for a business, resulting from the depreciation expense claimed on tangible assets.

Tax Rate

The percentage of income or value that is collected by the government as tax.

MACRS Depreciation

A method of depreciation in the U.S. that allows for a faster write-off of assets under the tax code.

Incremental Annual Cash Flow

The additional cash flow generated by a company from taking on a new project, calculated as the difference between the project's cash inflows and outflows.