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Discussion

Accelerated depreciation improves a project's economics by

  • A.increasing the saving the project delivers
  • B.extending the project's useful life
  • C.reducing the initial capital required
  • D.reducing the tax payable in the early years

Answer: D

Writing the asset down faster defers tax, and money deferred is money gained under discounting. It changes the cash flows without changing the engineering, which is why the finance department must be consulted on any substantial measure.

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