Economic Depreciation Is

question 21

Multiple Choice

Economic depreciation is

• A) the change in the distribution of real income induced by a tax.
• B) the extent to which an asset decreases in value during a period of time.
• C) the money value of the net increase in an individual's power to consume during a period.
• D) a subtraction from tax liability (as opposed to a subtraction from taxable income).

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Definitions:

Debt

An amount of money borrowed by one party from another, typically for large medium or long-term financial projects, with an obligation to pay back with interest.

Bankruptcy

A judicial process concerning an individual or company that cannot settle its due financial obligations.

M&M Without Taxes

A part of Modigliani and Miller's theory on corporate finance that suggests market value of a firm is unaffected by its capital structure in a tax-free environment.

M&M With Taxes

Modigliani and Miller's theory incorporating the impact of taxes on capital structure decisions.