Which of the Following Best Explains Why It Is Sensible

question 20

Multiple Choice

Which of the following best explains why it is sensible for a firm to use an accelerated depreciation schedule rather than straight-line depreciation?

• A)The firm will have substantially fewer depreciation expenses later in the depreciation timeline.
• B)The firm can decide over how many years an item may be depreciated, thus allowing it full control of its depreciation expenses.
• C)The firm will substantially decrease its depreciation tax shield across all of the depreciation timeline.
• D)The firm will receive greater benefits to its cash flow earlier in the depreciation timeline and thus increase net present value (NPV).

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Definitions:

Random Assignment

A method of assigning research participants to different groups using randomization, ensuring that each participant has an equal chance of being placed in any group.

Probability

The measure of the likelihood that an event will occur, expressed as a number between 0 and 1.

Spurious Relationships

An apparent but false relationship between two variables that is actually caused by a third variable.

Selection Bias

A distortion in the analysis resulting from the method of collection of data, where the sample is not representative of the population being studied.