For a growing firm, which depreciation method results in the highest return on assets (ROA)? Group...

For a growing firm, which depreciation method results in the highest return on assets (ROA)?

Group of answer choices

A) Double declining balance.

B) Straight line.

C) ROA is the same under all methods.

Solutions

Expert Solution

The question is based on the concept of charge of depreciation , Straight line method charge equal amount of depreciation each year for active life of asset. The Double declining balance (DDB) charges higher depreciation during the earlier years for active life of asset.

As per concept of present value of money, DDB give higher value of ROA in comparison to straight line method of depreciation. .

Answer : Option A: Double declining balance.

jeff jeffy answered 2 years ago

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