Which of the following statements is CORRECT?
A) Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 5 years or longer.
B) Corporations must use the same depreciation method for both stockholder reporting and tax purposes.
C) Using accelerated depreciation rather than straight line normally has the effect of speeding up cash flows and thus increasing a project's forecasted NPV.
D) Using accelerated depreciation rather than straight line normally has no effect on a project's total projected cash flows nor would it affect the timing of those cash flows or the resulting NPV of the project.
E) Since depreciation is a cash expense, the faster an asset is depreciated, the lower the projected NPV from investing in the asset.

Question

Quizplus · Accepted Answer

Using accelerated depreciation allows for more depreciation expense to be recognized in the early years of an asset's life, which can lower taxable income and increase cash flows. This can have the effect of increasing a project's forecasted NPV.

Which of the Following Statements Is CORRECT