APSC221 Midterm 2
use-related physical loss, time-related physcial loss, functional loss - correct
answer ✔reasons for depreciation
market value - correct answer ✔estimated value an asset can be sold for in
an open market (real value if sold)
book value - correct answer ✔estimated value of an asset for accounting
purposes
scrap value - correct answer ✔real or estimate value of an asset at the end
of its physical life
salvage value - correct answer ✔real or estimated value of an asset at the
end of its useful life
managerial decisions, planning decisions, taxes - correct answer ✔reasons
for depreciation model
straight-line depreciation - correct answer ✔assumes rate of loss in value of
an asset is uniform for all periods of its useful life
declining-balance depreciation - correct answer ✔assumes rate of loss of
current period is proportional to the book value of previous period
Progressive tax rate - correct answer ✔percentage of taxable income
increases with total income
, true - correct answer ✔Taxable income equals total income minus
deductions (i.e. tax credits)
Tax credits - correct answer ✔concern certain costs that are taxed at a
reduced rate
corporate income taxes - correct answer ✔Flat tax rate regardless of profit,
but proportional to size of company
true - correct answer ✔Small business deductions can reduce tax rate
before-tax-MARR - correct answer ✔impact of taxes is implicitly taken into
account, by setting a high MARR
after-tax-MARR - correct answer ✔impact of taxes is explicitly taken into
account, by setting a low MARR
𝑀𝐴𝑅𝑅𝑎𝑓𝑡𝑒𝑟−𝑡𝑎𝑥 ≅ 𝑀𝐴𝑅𝑅𝑏𝑒𝑓𝑜𝑟𝑒−𝑡𝑎𝑥 × (1 − 𝑡) - correct answer ✔after-tax
MARR equation
Before-Tax IRR - correct answer ✔calculated using before tax cash flows
After-Tax IRR - correct answer ✔calculated using after tax cash flows.
𝐼𝑅𝑅𝑎𝑓𝑡𝑒𝑟−𝑡𝑎𝑥 ≅ 𝐼𝑅𝑅𝑏𝑒𝑓𝑜𝑟𝑒−𝑡𝑎𝑥 × (1 − 𝑡) - correct answer ✔after-tax-IRR
equation
use-related physical loss, time-related physcial loss, functional loss - correct
answer ✔reasons for depreciation
market value - correct answer ✔estimated value an asset can be sold for in
an open market (real value if sold)
book value - correct answer ✔estimated value of an asset for accounting
purposes
scrap value - correct answer ✔real or estimate value of an asset at the end
of its physical life
salvage value - correct answer ✔real or estimated value of an asset at the
end of its useful life
managerial decisions, planning decisions, taxes - correct answer ✔reasons
for depreciation model
straight-line depreciation - correct answer ✔assumes rate of loss in value of
an asset is uniform for all periods of its useful life
declining-balance depreciation - correct answer ✔assumes rate of loss of
current period is proportional to the book value of previous period
Progressive tax rate - correct answer ✔percentage of taxable income
increases with total income
, true - correct answer ✔Taxable income equals total income minus
deductions (i.e. tax credits)
Tax credits - correct answer ✔concern certain costs that are taxed at a
reduced rate
corporate income taxes - correct answer ✔Flat tax rate regardless of profit,
but proportional to size of company
true - correct answer ✔Small business deductions can reduce tax rate
before-tax-MARR - correct answer ✔impact of taxes is implicitly taken into
account, by setting a high MARR
after-tax-MARR - correct answer ✔impact of taxes is explicitly taken into
account, by setting a low MARR
𝑀𝐴𝑅𝑅𝑎𝑓𝑡𝑒𝑟−𝑡𝑎𝑥 ≅ 𝑀𝐴𝑅𝑅𝑏𝑒𝑓𝑜𝑟𝑒−𝑡𝑎𝑥 × (1 − 𝑡) - correct answer ✔after-tax
MARR equation
Before-Tax IRR - correct answer ✔calculated using before tax cash flows
After-Tax IRR - correct answer ✔calculated using after tax cash flows.
𝐼𝑅𝑅𝑎𝑓𝑡𝑒𝑟−𝑡𝑎𝑥 ≅ 𝐼𝑅𝑅𝑏𝑒𝑓𝑜𝑟𝑒−𝑡𝑎𝑥 × (1 − 𝑡) - correct answer ✔after-tax-IRR
equation
