Which of the following statements regarding CCA is true?
A) Since CCA deduction is a cash expense, the faster an asset is depreciated, the lower the projected NPV from investing in the asset.
B) When corporations use CCA depreciation method, the stockholder report financially looks better.
C) CCA is a pool concept calculating values for the entire asset class, not individual assets.
D) Using CCA declining-balance depreciation rather than straight line normally has the effect of slowing down cash flows and thus reducing a project's forecasted NPV.

Question

Quizplus · Accepted Answer

CCA is a pool concept that calculates depreciation for the entire asset class, not individual assets. Statement A is false since CCA deduction is a non-cash expense, and statement B is not necessarily true as it depends on the specific financial situation of the corporation. Statement D is also false since using CCA declining-balance depreciation can accelerate cash flows and potentially increase a project's forecasted NPV.

Which of the Following Statements Regarding CCA Is True