A Manager Electing to Adopt a Depreciation Method That Increases

question 25

Multiple Choice

A manager electing to adopt a depreciation method that increases income,but does not reflect the actual use of the asset,is consistent with:

• A) The efficiency perspective of Positive Accounting Theory
• B) The opportunistic perspective of Positive Accounting Theory
• C) Both the opportunity and the efficiency perspectives of Positive Accounting Theory
• D) Neither the opportunity nor the efficiency perspectives of Positive Accounting Theory

Apply the concept of net present value (NPV) and the use of discount factors in evaluating the viability of projects.

Calculate and interpret the total cash flow net of income taxes for different years of a project’s life.

Understand the impact of depreciation on cash flows and tax liabilities in capital budgeting decisions.

Analyze the effects of one-time costs such as equipment purchases and renovation costs on the financial outcomes of projects.

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Definitions:

Expected Value

The anticipated value or return of a variable, taking into account all possible outcomes and their probabilities.

Income

Money received, especially on a regular basis, for work or through investments.

Insurance

A financial product sold by companies to individuals or entities to protect against financial loss or damage from specified risks.

Probability

The measure of the likelihood that an event will occur, quantified as a number between 0 and 1, where 1 indicates certainty.