Homework Answers
1.
2. Lowest EPS:
- Year 1: double declining method.
- Year 2: Units of Production.
3. Depreciation is not cash expense. So the cash outflow would be caused by higher outflow of taxes. That means the lowest among three type of depreciation would give higher cash outflow in form of tax. So it's Straight line method.
4. A) acquiring a machine would result in Cash Outflow under Investing Activities.
B) Depreciation is an non cash expense. Hence it has no impact on the cash flow statements. So, any depreciation expense charged in income Statement it to be added back while computing cash flow from operating activities.
Please comment in case of any query regarding the solution.
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