What Is the Formula for the Multiplier That Results from a Change

question 71

Multiple Choice

What is the formula for the multiplier that results from a change in autonomous net taxes?  

• A) -MPC/(1 - MPC) 
• B) MPC/(1 - MPC) 
• C) 1/(1 - MPC) 
• D) -1/(1 - MPC)

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Definitions:

Double-Declining-Balance Rate

A method of accelerated depreciation which doubles the rate at which an asset’s book value is depreciated compared to straight-line depreciation.

Double-Declining-Balance Depreciation

An accelerated method of depreciation where an asset's book value is decreased at double the rate of straight-line depreciation.

Straight-Line Depreciation

A technique for distributing the expense of an asset equally over its lifespan.

Book Value

A financial metric that calculates the net asset value of a company's assets minus its liabilities, representing the shareholders' equity value in accounting terms.