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Switching from declining balance to straight line is done because the declining balance charge

  • A.cannot be computed after the midpoint of the life
  • B.is not permitted by any tax authority
  • C.eventually falls below the straight line charge
  • D.eventually exceeds the straight line charge

Answer: C

The geometric charge starts large and shrinks, so at some point a straight line write-off of the remaining book value over the remaining life gives more. Switching at that point maximises the present worth of the tax saving.

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