The Asset Intensive Company (AIC) has purchased equipment for $1 million. The equipment is expected to have a three-year useful life and a salvage value of $100,000. AIC reports under U.S. GAAP.

Over the full life of the machine, all else equal, the volatility of AIC’s net income will be

a. the same regardless of whether AIC expenses or capitalizes the cost of the machine.

b. highest if the company expenses the entire cost of the machine in the year of its purchase.

c. highest if the company capitalizes the cost of the machine and depreciates it over its useful life.