The advantage of ________ over ________ depreciation is that you can write off more of your capital costs in the earlier years. A) straight-line depreciation; the modified accelerated cost recovery system B) straight-line depreciation; straight-line deductions C) MACRS; straight-line depreciation D) MACRS; straight-line deductions ANSWER Answer: C
________ costs each year do not reflect cash flow because the actual purchase and installation (outflow of dollars) of the asset have already taken place. A) Depreciation B) Sunk C) Opportunity D) Working Capital ANSWER Answer: A
A firm is considering purchasing an asset that will cost $5 million. Other depreciable costs include $800,000 in installation costs. If the asset is classified in the 5-year class, what is the annual depreciation for years 1, 3, and 6 for this asset, using the fixed depreciation percentages given by MACRS? (The percentages are 20.00%, […]
Short-term financial management is concerned with management of a firm’s current assets and current liabilities to achieve a balance between profitability and risk. Indicate whether the statement is true or false ANSWER TRUE
Which of the following was NOT mentioned by Akerlof to mitigate the lemons problem? a. certification b. using a costly signal c. private negotiation d. establishing a reputation e. contract enforcement ANSWER C
A firm is considering purchasing an asset that will cost $1 million. Other depreciable costs include $100,000 in installation costs. If the asset is classified in the 3-year class, what is the annual depreciation for each year for this asset using the fixed depreciation percentages given by MACRS? (The percentages are 33.33%, 44.45%, 14.81%, and […]
Firms are able to reduce financing costs or increase the funds available for expansion by maximizing the amount of funds tied up in working capital. Indicate whether the statement is true or false ANSWER TRUE
The advantage of straight-line depreciation over MACRS depreciation is that you can write off ________. A) more of your total capital costs B) your capital costs in fewer years C) a larger percentage of your capital costs earlier D) None of the above ANSWER Answer: D
The advantage of MACRS over straight-line depreciation is that you can write off more of your capital costs in the ________ years. A) middle B) last C) later D) earlier ANSWER Answer: D
A firm is considering purchasing two assets. Asset A will have a useful life of 12 years and cost $4 million; it will have installation costs of $300,000 and a salvage or residual value of $400,000. Asset B will have a useful life of 8 years and cost $3.5 million; it will have installation costs […]
