Which of the Following Statements Is False

question 24

Multiple Choice

Which of the following statements is false?

• A) Depreciation is a method used for accounting and tax purposes to allocate the original purchase cost of the asset over its life.
• B) Sometimes the firm explicitly forecasts free cash flow over a shorter horizon than the full horizon of the project or investment.
• C) Earnings include the cost of capital investments, but do not include non-cash charges, such as depreciation.
• D) Firms often report a different depreciation expense for accounting and for tax purposes.

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Definitions:

Depreciation

A method of allocating the cost of a physical or tangible asset over its expected usable life to account for decreases in value over time.

Residual Value

The estimated value that an asset will realize upon its sale at the end of its useful life.

Asset Cost

The total amount incurred to acquire an asset, including purchase price and all expenditures necessary to bring the asset to its intended use.