A Principal Objection to the Straight-Line Method of Depreciation Is

question 24

Multiple Choice

A principal objection to the straight-line method of depreciation is that it

• A) Provides for the declining productivity of an aging asset
• B) Ignores variations in the rate of asset use
• C) Tends to result in a constant rate of return on a diminishing investment base
• D) Gives smaller periodic write-offs than decreasing charge methods

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Definitions:

Cash Flows

Cash flows refer to the net amount of cash and cash-equivalents being transferred into and out of a business, crucial for assessing the financial health and liquidity of a company.

MIRR

MIRR (Modified Internal Rate of Return) adjusts the standard IRR calculation to account for differences in reinvestment rates and project financing costs.

Mutually Exclusive

Refers to events or choices that cannot occur or be selected at the same time.

WACC

Weighted Average Cost of Capital is a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.