Which of the following best explains why is it sensible for a firm to use an accelerated depreciation schedule such as MACRS rather than straight-line depreciation?
A) The firm will substantially decrease its depreciation tax shield across all of the depreciation timeline.
B) The firm can decide over how many years an item may be depreciated, thus allowing it full control of its depreciation expenses.
C) The firm will have substantially fewer depreciation expenses later in the depreciation timeline.
D) The firm will receive greater benefits to its cash flow earlier in the depreciation timeline and thus increase net present value (NPV).

Question

Quizplus · Accepted Answer

Using an accelerated depreciation schedule, such as MACRS, allows the firm to receive greater tax benefits and expense deductions earlier in the depreciation timeline. This increase in cash flow can improve the firm's net present value (NPV) and overall financial performance.

Which of the Following Best Explains Why Is It Sensible