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
As Akerlof argues, sellers who have a lemon, of course, know they have lemon but are not willing to tell the truth about the condition of their auto and, for the short selling period involved, can put their auto in a satisfactory condition that approximates the normal condition of the auto that are not lemons. […]
A firm is considering purchasing two assets. Asset L will have a useful life of 20 years and cost $5 million; it will have installation costs of $1 million but no salvage or residual value. Asset S will have a useful life of 8 years and cost $2 million; it will have installation costs of […]
Pecking order is a hierarchy of financing beginning with retained earnings, followed by debt financing, and finally external equity financing. Indicate whether the statement is true or false ANSWER TRUE
