All else equal, the sooner a depreciation allowance is taken, ________ .
A)the more likely the net present value of the investment will be positive
B)the less likely the net present value of the investment will be positive
C)the more likely the net present value of the investment will be negative
D)the less likely the net present value of the investment will be affected

Question

Quizplus · Accepted Answer

Taking a depreciation allowance sooner means that more of the cost of the investment will be deducted from taxable income in earlier periods, resulting in a lower tax bill and a higher net present value of the investment. Therefore, the more likely the net present value of the investment will be positive.

All Else Equal, the Sooner a Depreciation Allowance Is Taken