Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $475,000 of equipment. She is unsure what depreciation method to use in her analysis, straight-line or the 3-year MACRS accelerated method. Under straight-line depreciation, the cost of the equipment would be depreciated evenly over its 4-year life (ignore the half-year convention for the straight-line method). The applicable MACRS depreciation rates are 33%, 45%, 15%, and 7%. The company's WACC is 11 %, and its tax rate is 30%. What would the depreciation expense be each year under each method? Round your answers to the nearest cent. Year Scenario 1 (Straight - Line) Scenario 2 (MACRS) 1 $ $ 234 Which depreciation method would produce the higher NPV? -Select- How much higher would the NPV be under the preferred method? Round your answer to two decimal places. Do not round your intermediate calculations. $
Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $475,000 of equipment. She is unsure what depreciation method to use in her analysis, straight-line or the 3-year MACRS accelerated method. Under straight-line depreciation, the cost of the equipment would be depreciated evenly over its 4-year life (ignore the half-year convention for the straight-line method). The applicable MACRS depreciation rates are 33%, 45%, 15%, and 7%. The company's WACC is 11 %, and its tax rate is 30%. What would the depreciation expense be each year under each method? Round your answers to the nearest cent. Year Scenario 1 (Straight - Line) Scenario 2 (MACRS) 1 $ $ 234 Which depreciation method would produce the higher NPV? -Select- How much higher would the NPV be under the preferred method? Round your answer to two decimal places. Do not round your intermediate calculations. $
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows
Section: Chapter Questions
Problem 12MC: You are also considering another project that has a physical life of 3 years—that is, the machinery...
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