The Equivalent Annual Cost Method Is Useful in Determining

question 33

Multiple Choice

The equivalent annual cost method is useful in determining:

• A)which one of two machines to purchase if the machines are mutually exclusive, have differing lives, and are a one-time purchase.
• B)the tax shield benefits of depreciation given the purchase of new assets for a project.
• C)the operating cash flows of a cost-cutting project.
• D)which one of two investments to accept when the investments have different required rates of return.
• E)which one of two machines should be purchased when the machines are mutually exclusive, have different machine lives, and will be replaced once they are worn out.

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Definitions:

Casualty

A sudden, unexpected, or unusual event that causes damage or loss, often used in reference to natural disasters for tax deduction purposes.

Self-Employment Tax

This is a charge including Social Security and Medicare dues, principally aimed at those working independently.

Form 1040

Form 1040 is the U.S. federal income tax form used by individuals to file their annual income tax returns with the Internal Revenue Service (IRS).

Schedule SE

The tax form used by self-employed individuals to calculate the taxes owed on net earnings from self-employment.