The Present Value of the Depreciation Tax Shield at Any

question 69

Multiple Choice

The present value of the depreciation tax shield at any given discount rate is:

• A) equal for all depreciation methods.
• B) higher with MACRS than with straight-line depreciation.
• C) higher for the 7-year recovery period than for the 5-year recovery period class.
• D) likely to increase annually due to inflation.

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Definitions:

Concurrent Validity

A measure of how well a particular test correlates with a previously validated measure taken at the same time.

Construct Validity

The extent to which a test or measurement tool accurately measures the theoretical construct it is intended to measure.

Content Validity

The extent to which a test measures all aspects of the concept it intends to measure.

Predictive Validity

The extent to which a test or measure accurately predicts future performance or outcomes.