If permitted a choice of depreciation methods for tax reporting, a firm should try to maximize the amount of the
A)reductions in tax payments from claiming depreciation.
B)present value of the reductions in tax payments from claiming depreciation.
C)future value of the reductions in tax payments from claiming depreciation.
D)present value of the increase in tax payments from claiming depreciation.
E)amount of the increase in tax payments from claiming depreciation.

Question

Quizplus · Accepted Answer

Maximizing the present value of the reductions in tax payments from claiming depreciation would result in the highest benefit for the company. This is because the present value takes into account the time value of money, and therefore, receiving larger tax savings earlier is more beneficial than the same amount of tax savings spread out over a longer period.

If Permitted a Choice of Depreciation Methods for Tax Reporting