Which of the following statements is correct? A. Since depreciation is a cash ex

Question

Which of the following statements is correct?

A. Since depreciation is a cash expense, the faster an asset is depreciated, the lower the projected NPV from investing in the asset.

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 MACRS depreciation for both stockholder reporting and tax purposes.

D. Using MACRS depreciation rather than straight line normally has the effect of speeding up cash flows and thus increasing a project's forecasted NPV.

E. Using MACRS depreciation rather than straight line normally has the effect of slowing down cash flows and thus reducing a project's forecasted NPV.

Explanation / Answer

D. Using MACRS depreciation rather than straight line normally has the effect of speeding up cash flows and thus increasing a project's forecasted NPV.

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