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Natasha_Volkova [10]
3 years ago
15

The Nantell Corporation just purchased an expensive piece of equipment. Assume that the firm planned to depreciate the equipment

over 5 years on a straight-line basis, but Congress then passed a provision that requires the company to depreciate the equipment on a straight-line basis over 7 years. Other things held constant, which of the following will occur as a result of this Congressional action
A) Nantell's taxable income will be lower
B) Nantell's operating income (EBIT) will increase
C) Nantell's cash position will improve (increase)
D) Nantell's reported net income for the year will be lower
E) Nantell's tax liability for the year will be lower
Business
1 answer:
gtnhenbr [62]3 years ago
4 0

Answer:

D

Explanation:

Nantell's operating income (EBIT) will increase., because now the company will record lower depreciation expense in the income statement due to increase in the life from 5 to 7 taken for the depreciation purposes. So decline in depreciation will result in higher EBIT.

a. is wrong as lower depreciation means higher net income.

b. is wrong as tax liability will not get impacted as tax will follows old method of depreciation.

c. is incorrect as depreciation is non cash expense thus does not impact cash position and tax has already be on the earlier method.

e. is incorrect as increase in EBIT will result in higher taxable income.

hence option D is the only correct option

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Basic similarity and different between BAUM, UNIDO, DEPSA project life cycle
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Answer:

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A. The BAUM project lifecycle refers to the World Banks' project development cycle as described by Warren Baum.  

The BAUM project life cycle features 6 stages namely:

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B. UNIDO - The UNIDO model features three major stages which are also broken down into various steps.

Pre-investment phase

This phase is further divided into:

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This stage is further broken down into:

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  3. Operational phase  

This is also broken down into:  

Replacement of equipment  due to wear and tear or upgrade to better technologies

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C. DEPSA stands for "Development Project Studies Authority".

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The DEPSA stage is very similar to the UNIDO project life cycle. Both are defined according to an Investment Cycle paradigm and that's the reason why you have pre-investment, investment and operations phase for both methodologies.  

Whilst the UNIDO model is more 'universal' in that it speaks to a wide range of businesses including engineering projects, DEPSA seems a little skewed towards engineering projects.  

This is evident in the terminologies used in the investment phases. With DEPSA you would notice terms like 'detailed engineering design'

'construction', and 'erection'. The UNIDO the investment phase contains engineering terms but also speaks to 'marketing' and 'training'  

While the BAUM project lifecycle contains all the basic stages in the DEPSA and UNIDO life cycles, it holds a universal outlook and seems applicable to both business and engineering projects.

Cheers!

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