Question

Variable CONES need to be considered in the project, but not fixed costs. b. Variable costs and fixed costs need to be considered in the way capital budgeting project. The NPV criterion is preferable for evaluating expansion projects, IRR criterion is preferable for evaluating replacement projects The IRR criterion is preferable for evaluating expansion projects, while the NVP criterion is preferable for evaluating replacement projects e. None of the above. ii. Accelerated depreciation is usually preferred to straight-line depreciation because of... a. operating working capital considerations. b. salvage value considerations. required rate of return considerations. d. time value of money considerations. none of the above. Below is an illustration of the security market line.

Answer 1

Answer:-   (e) None of the Above

Justification:- Accelerated depreciation is a depreciation method whereby an asset loses book value at a faster rate than the traditional straight-line method. Generally, this method allows greater deductions in the earlier years of an asset and is used to minimize taxable income.

Let's assume Company XYZ purchases a piece of machinery for $1,000,000, and that piece of machinery is expected to last for 10 years. If Company XYZ were using the straight-line method of depreciation (not accelerated), each year it would simply record on its income statement depreciation expense equal to one-tenth of the asset's cost ($1,000,000/10 = $100,000). This method would spread the cost of the asset out evenly over the life of the asset.

However, if Company XYZ uses an accelerated depreciation method, it might expense far more of the asset's cost in the first few years and expense less cost in the later years.The most popular accelerated depreciation methods are the Sum of the Years Digits method.The formula for Sum of the Years Digits Depreciation is:

(Years of useful life left / (10+9+8+7+6+5+4+3+2+1)) x (original cost - salvage value)

In year 1, Company XYZ's depreciation expense using the Sum of the Years Digits method would be:

(10 / (10+9+8+7+6+5+4+3+2+1)) x ($1,000,000 - $0) = $181,818