Given the financial manager's preference for faster receipt of cash flows, a longer depreciable life is preferred to a shorter one.

Question

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A longer depreciable life means that the cost of the asset is spread out over a longer period of time, resulting in smaller annual depreciation expenses. This would result in slower receipt of cash flows, which is not preferred by the financial manager who wants to receive cash more quickly. Therefore, a shorter depreciable life is preferred in order to accelerate the depreciation expense and receive the tax benefits and cash flows sooner.

Given the Financial Manager's Preference for Faster Receipt of Cash