Which of the following statements is CORRECT? A) Since depreciation is not a cash expense, and since cash flows and not accounting income are the relevant input, depreciation plays no role in capital budgeting. B) Under current laws and regulations, corporations must use straight- line depreciation for all assets whose lives are 3 years or longer. C) If firms use accelerated depreciation, they will write off assets slower than they would under straight-line depreciation, and as a result projects' forecasted NPVs are normally lower than they would be if straight-line depreciation were required for tax purposes. D) If they use accelerated depreciation, firms can write off assets faster than they could under straight-line depreciation, and as a result projects' forecasted NPVs are normally lower than they would be if straight-line depreciation were required for tax purposes. E) If they use accelerated depreciation, firms can write off assets faster than they could under straight-line depreciation, and as a result projects' forecasted NPVs are normally higher than they would be if straight-line depreciation were required for tax purposes.

Question

Quizplus · Accepted Answer

Accelerated depreciation allows firms to write off assets faster, leading to higher initial tax savings and cash flows, which can increase the project's NPV compared to using straight-line depreciation.

Which of the Following Statements Is CORRECT