Expensive piece of equipment

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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? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes.

a. Nantell's reported net income for the year will be lower.

b. Nantell's tax liability for the year will be lower.

c. Nantell's cash position will improve (increase).

d. Nantell's operating income (EBIT) will increase.

e. Nantell's taxable income will be lower.

Reference no: EM13985582

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