Why is accelerated depreciation often favored for the corporation's set of tax books?
A) It increases the total depreciation tax shield over the project's life.
B) It reduces the total amount of taxes paid over the project's life.
C) It increases net accounting profits over the project's life.
D)It impacts favorably with the time value of money.

Question

Quizplus · Accepted Answer

Accelerated depreciation is favored because it allows for larger depreciation expenses in the early years of an asset's life, reducing taxable income sooner rather than later. This aligns with the time value of money principle, where a dollar saved today is more valuable than a dollar saved in the future, due to the potential for investment and earning interest. It does not increase the total depreciation tax shield or reduce the total taxes paid over the project's life, nor does it increase net accounting profits over the project's life.

Why Is Accelerated Depreciation Often Favored for the Corporation's Set