Charlene is evaluating a capital budgeting project that
should
last for 4 years. The project requires $800,000 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%, as discussed in
Appendix 12A. The company’s WACC is 8%, and its tax rate is
35%.
a. What would the depreciation expense be each year under each
method?
b. Which depreciation method would produce the higher NPV, and how
much higher
would it be?
(please type minimal work and just give answer)
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Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires...
Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $525,000 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 13%, and its tax...
Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $900,000 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...
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Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $725,000 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 10%, and its tax...
DEPRECIATION METHODS Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $750,000 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 14%, and...
DEPRECIATION METHODS Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires 5950,000 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 13%, and...
DEPRECIATION METHODS Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $ 700,000 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 12%,...
DEPRECIATION METHODS Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $975,000 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 13%, and...
DEPRECIATION METHODS Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $750,000 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 12%, and...