The Equivalent Annual Cost Method Is Useful in Determining

question 81

Multiple Choice

The equivalent annual cost method is useful in determining:

• A) the annual operating cost of a machine if the annual maintenance is performed versus when the maintenance is not performed as recommended.
• B) the tax shield benefits of depreciation given the purchase of new assets for a project.
• C) operating cash flows for cost-cutting projects of equal duration.
• D) which one of two machines to acquire given equal machine lives but unequal machine costs.
• E) which one of two machines to purchase when the machines are mutually exclusive, have different machine lives, and will be replaced once they are worn out.

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Definitions:

Equity Securities

Financial instruments indicating ownership in a corporation, such as stocks, which provide dividends and capital gains as returns to investors.

Stated Value

In accounting, a value assigned to share capital that does not have a par value; used for legal capital determination.

No-par Stock

Stock issued without a specified face value or par value.

Share

An individual portion of ownership in a corporation, represented by a stock.