Q7. In industries where there are rapid changes in technology related to production processes, which of the following characteristics will most likely indicate that a firm has a competitive advantage?

A)   Low average age of equipment.

B)   Low capital expenditures.

C)   High earnings per share.

Q8. Two companies in the same industry are similar in all aspects except that the average age of the depreciable assets for Company B is 10 times greater than the average age of the depreciable assets for Company A. Which of the following statements is least likely accurate? Company B will have:

A)   a competitive advantage in the future.

B)   higher taxes.

C)   lower depreciation expense.

Q9. Ending gross investment/depreciation expense is used to estimate the average:

A)   age as a percent of depreciable life.

B)   age.

C)   depreciable life.

Q10. A firm using straight-line depreciation reports the following financial information:

• Gross investment in fixed assets of $89,167,205.

• Accumulated depreciation of $35,341,773.

• Annual depreciation expense of $3,885,398.

The approximate age of the fixed assets is:

A)   2.52 years.

B)   22.95 years.

C)   9.10 years.

答案和详解如下：

Q7. In industries where there are rapid changes in technology related to production processes, which of the following characteristics will most likely indicate that a firm has a competitive advantage?

A)   Low average age of equipment.

B)   Low capital expenditures.

C)   High earnings per share.

Correct answer is A)

Average age of depreciable assets is useful for two reasons:

1.          To assess how competitive the corporation will be going forward (older assets are less efficient).

2.          Estimate financing required for major capital expenditures to replace depreciated assets.

While low capital expenditures may result in higher earnings in the short run, in the long run, the company may find itself at a comparative disadvantage if technological changes are rapidly increasing. EPS is not comparable between companies.

Q8. Two companies in the same industry are similar in all aspects except that the average age of the depreciable assets for Company B is 10 times greater than the average age of the depreciable assets for Company A. Which of the following statements is least likely accurate? Company B will have:

A)   a competitive advantage in the future.

B)   higher taxes.

C)   lower depreciation expense.

Correct answer is A)

Company A will most likely have a competitive advantage from using newer equipment on average. Company B’s assets are mostly depreciated. Therefore, depreciation expense will be lower and if all other aspects are similar, the earnings and taxes for Company B will be higher.

Q9. Ending gross investment/depreciation expense is used to estimate the average:

A)   age as a percent of depreciable life.

B)   age.

C)   depreciable life.

Correct answer is C)

Average depreciable life is approximated by: ending gross investment / depreciation expense

Q10. A firm using straight-line depreciation reports the following financial information:

• Gross investment in fixed assets of $89,167,205.

• Accumulated depreciation of $35,341,773.

• Annual depreciation expense of $3,885,398.

The approximate age of the fixed assets is:

A)   2.52 years.

B)   22.95 years.

C)   9.10 years.

Correct answer is C)

Average age of fixed assets = accumulated depreciation / annual depreciation = $35,341,773 / $3,885,398 = 9.10.

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