Would a firm prefer to use macrs depreciation

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Question 1. In the context of capital budgeting, what is an opportunity cost?

Question 2. Given the choice, would a firm prefer to use MACRS depreciation or straight-line depreciation? Why?

Question 3. In our capital budgeting examples, we assumed that a firm would recover all of the working capital it invested in a project. Is this a reasonable assumption? When might it not be valid?

Question 4. Suppose a financial manager is quoted as saying, "Our firm uses the stand-alone principle. Because we treat projects like minifirms in our evaluation process, we include financing costs because they are relevant at the firm level." Critically evaluate this statement.

Reference no: EM133326306

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