COST ACCOUNTING
CAPITAL BUDGETING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a decrease in the marginal tax rate
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a decrease in the discount rate
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a decrease in the rate of depreciation
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an increase in the life expectancy of the depreciable asset
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Detailed explanation-1: -Which of the following changes would not decrease the present value of the future depreciation deductions on a specific depreciable asset? after-tax rate of interest for bonds and stated annual dividend rate for preferred stock.
Detailed explanation-2: -Depreciation is found on the income statement, balance sheet, and cash flow statement. It can thus have a big impact on a company’s financial performance overall. Ultimately, depreciation does not negatively affect the operating cash flow (OCF) of the business.
Detailed explanation-3: -Balance Sheet: Net Fixed Assets (generally Plant, Property, and Equipment) is reduced by the amount of the Depreciation. This reduces Fixed Assets. It also reduces Net Income and therefore Retained Earnings (Shareholders’ Equity) as well.
Detailed explanation-4: -When a company sells or retires an asset, its total accumulated depreciation is reduced by the amount related to the sale of the asset. The total amount of accumulated depreciation associated with the sold or retired asset or group of assets will be reversed.
Detailed explanation-5: -Definition: The monetary value of an asset decreases over time due to use, wear and tear or obsolescence. This decrease is measured as depreciation.