Which of the Following Statements Is CORRECT

question 57

Multiple Choice

Which of the following statements is CORRECT?

• A) Using accelerated depreciation rather than straight line would normally have no effect on a project's total projected cash flows but it would affect the timing of the cash flows and thus the NPV.
• B) Under current laws and regulations,corporations must use straight-line depreciation for all assets whose lives are 5 years or longer.
• C) Corporations must use the same depreciation method (e.g. ,straight line or accelerated)for stockholder reporting and tax purposes.
• D) Since depreciation is not a cash expense,it has no effect on cash flows and thus no effect on capital budgeting decisions.
• E) Under accelerated depreciation,higher depreciation charges occur in the early years,and this reduces the early cash flows and thus lowers a project's projected NPV.

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Definitions:

Fiscal Policy

Government policies regarding taxation and spending to influence the economy.

Taxes

Required fiscal contributions or alternative kinds of dues enforced on taxpayers by governmental bodies aimed at raising funds for government activities and diverse public expenses.

Unemployment Benefits

Financial payments made by the government to individuals who are unemployed and meet certain eligibility requirements.

Income Taxes

Taxes levied by governments on the income generated by individuals or entities, which vary according to the level of income earned.