Which of the Following Statements Is CORRECT

question 27

Multiple Choice

Which of the following statements is CORRECT?

• A) under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 3 years or longer.
• B) if firms use accelerated depreciation, they will write off assets slower than they would under straight-line depreciation, and as a result projects' forecasted npvs are normally lower than they would be if straight-line depreciation were required for tax purposes.
• C) if they use accelerated depreciation, firms can write off assets faster than they could under straight-line depreciation, and as a result projects' forecasted npvs are normally lower than they would be if straight-line depreciation were required for tax purposes.
• D) if they use accelerated depreciation, firms can write off assets faster than they could under straight-line depreciation, and as a result projects' forecasted npvs are normally higher than they would be if straight-line depreciation were required for tax purposes.
• E) since depreciation is not a cash expense, and since cash flows and not accounting income are the relevant input, depreciation plays no role in capital budgeting.

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Definitions:

Income Elasticity

A measure of how the demand for a good or service changes in response to changes in consumers' income.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a specific price level.

Inelastic Demand

A situation where the demand for a good or service does not significantly change in response to price changes.

Midpoint Method

A technique used in economics to calculate the percentage change between two points, providing a more accurate measure than simple percentage calculations.