(a) Both depreciation and interest on borrowed money are by default in then-current form and thus, one needs to convert them to constant dollars form if the inflation effect is not considered in the after-tax analysis. (b) The book value at the end of the cost recovery period in the declining balance method is equal to the salvage value (c) In the insider's viewpoint approach, we consider market value of the current asset as its investment cost if it is retained
(a) Both depreciation and interest on borrowed money are by default in then-current form and thus, one needs to convert them to constant dollars form if the inflation effect is not considered in the after-tax analysis. (b) The book value at the end of the cost recovery period in the declining balance method is equal to the salvage value (c) In the insider's viewpoint approach, we consider market value of the current asset as its investment cost if it is retained
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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For the following answer true or false and very bri
Transcribed Image Text:(a) Both depreciation and interest on borrowed money are by default in then-current form and thus,
one needs to convert them to constant dollars form if the inflation effect is not considered in the
after-tax analysis.
(b) The book value at the end of the cost recovery period in the declining balance method is equal
to the salvage value
(c) In the insider's viewpoint approach, we consider market value of the current asset as its
investment cost if it is retained
(d) Corporates are allowed to take both a Section 179 expense deduction and bonus depreciation,
simultaneously.
(e) There exists exactly one real positive-valued internal rate of
return for the following cash flow.
EOY
1
23
3
Cash flow
(S)
-30,000
35,000
-6,000
10,000
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