Unstable Ltd Has Decided to Change Its Depreciation Method from Straight-Line

question 30

Multiple Choice

Unstable Ltd has decided to change its depreciation method from straight-line to reducing balance.As a result,its annual depreciation expense increases by $200 000.The company's income tax rate is 30 per cent.
-What is the effect on ROE?

• A) It increases.
• B) It decreases.
• C) It is not effected.
• D) It cannot be determined from the information provided.

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Definitions:

GE/McKinsey Grid

A strategic tool used to evaluate a company’s business portfolio based on market attractiveness and business unit strength.

BCG Matrix

A strategic business analysis tool used to evaluate the position of a company's products or services within its portfolio based on their market growth rate and relative market share.

Objectivity

The practice of being unbiased, not influenced by personal feelings or opinions in considering and representing facts.