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
Date: September 19th, 2020
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 […]
Date: September 19th, 2020
The annual straight-line depreciation expense is the total value (cost plus installation) minus any anticipated salvage value divided by the number of years of service (life) of the machine. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
According to the finance literature related to informational asymmetry, one of the most important roles of an investment-banking firm (in terms of assisting a firm in issuing securities to the public) is to vouch for the value of the security, after it has obtained confidential information from the firm’s management about its business strategy. This […]
Date: September 19th, 2020
Termination is the process of “expiring” the cost of a long-term tangible asset over its useful life. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: Depreciation is the process of “expiring” the cost of a long-term tangible asset over its useful life.
Date: September 19th, 2020
Discuss and contrast the three types of loans discussed in the text that use inventory as collateral: floating inventory liens, trust receipt inventory loans, and warehouse receipt loans. What will be an ideal response? ANSWER A floating inventory lien is certainly the easiest for a firm since the lender just takes a lien […]
Date: September 19th, 2020
Working capital refers to a firm’s long-term capital. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Akerlof also discusses the problem of _ in the health insurance market. Health insurers attempt to estimate, for each individual insurance applicant, the probability that they will file an insurance claim, and price insurance premiums accordingly. However, this is an imperfect process, so the insurer must offer a common premium to a specified group of […]
Date: September 19th, 2020
The ________ a capital asset is NOT part of the MACRS and is ignored for depreciation expense. A) salvage value of B) dividends paid from C) inventory from D) straight-line value of ANSWER Answer: A
Date: September 19th, 2020
A firm is considering purchasing an asset that will have a useful life of 8 years and cost $5.5 million; it will have installation costs of $90,000 and a salvage or residual value of $1,600,000. What is the annual straight-line depreciation for this asset A) $400,000 per year B) $422,000 per year C) $498,750 per […]
Date: September 19th, 2020
