If the Capital Budgeting Decision Includes a Replacement Analysis, Then

question 81

Multiple Choice

If the capital budgeting decision includes a replacement analysis, then

• A)a gain from the sale of the old asset will represent a tax savings inflow.
• B)only incremental cash flows should be considered.
• C)the sale price and tax savings will increase the cash inflows throughout the asset's life.
• D)Two of the options

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Definitions:

Legal Corporation

A legal corporation is an entity that is legally recognized as a separate entity from its owners, providing limited liability protection to its shareholders.

Business Combination

The process of merging two or more companies into one entity, which includes acquisitions and consolidations.

Pooling of Interest Method

An accounting method used in mergers and acquisitions, where the combined assets and liabilities of the merging entities are recorded at their historical costs.

GAAP

Generally Accepted Accounting Principles; a collection of commonly-followed accounting rules and standards for financial reporting.