The Client Is a Corporation Which Uses High-Tech Equipment to Manufacture

question 15

Multiple Choice

The client is a corporation which uses high-tech equipment to manufacture its product.Because of the high level of wear and tear due to long production runs and frequent technology changes,the client usually replaces the equipment every two years.According to IRS guidance,the MACRS life of the equipment is five years.In order to accelerate depreciation deductions,which tax depreciation option should the client elect?

• A)alternative depreciation system (ADS)
• B)regular MACRS treatment
• C)MACRS with a straight-line election
• D)units-of-production method

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Definitions:

Market Price

The current selling or buying price for an asset or service.

NPV

Net Present Value; a calculation used to determine the present value of an investment's future cash flows minus the initial investment cost.

All Cash Deal

A transaction where the payment for a purchase is made entirely with cash without the use of financing or exchanging stock.

Incremental Value

The additional or extra value generated from a specific action, decision, or investment, compared to what would have occurred without it.