Homework Answers
a:
| Year | Straight line depreciation | 100% Bonus |
| 0 | 250000 | |
| 1 | 62500 | |
| 2 | 62500 | |
| 3 | 62500 | |
| 4 | 62500 | |
b: Bonus depreciation method will give the higher NPV since there will be greater tax shield in earlier years.
c:
| Difference | 15565.02 |
Workings
| Tax shield | |||||
| Year | Straight line depreciation | 100% Bonus | Straight line depreciation | 100% Bonus | |
| 0 | 250000 | 0 | 75000 | ||
| 1 | 62500 | 18750 | |||
| 2 | 62500 | 18750 | |||
| 3 | 62500 | 18750 | |||
| 4 | 62500 | 18750 | |||
| NPV | 59434.98 | 75000.00 | |||
| Difference | 15565.02 | ||||
Add Answer to:
5. Problem 12.06 (Depreciation Methods) eBook Charlene is evaluating a capital budgeting project that should last...
5. Problem 12.06 (Depreciation Methods) eBook Charlene is evaluating a capital budgeting project that should last...
5. Problem 12.06 (Depreciation Methods) eBook Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $975,000 of equipment and is eligible for 100% bonus depreciation. She is unsure whether immediately expensing the equipment or using straight-line depreciation is better for the analysis. 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 company's WACC is 8%, and its...
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 $225,000 of equipment and is eligible for 100% bonus depreciation. She is unsure whether immediately expensing the equipment or using straight-line depreciation is better for the analysis. 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 company's WACC is 12%, and its tax rate is 30%. a. What...
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 $900,000 of equipment and is eligible for 100% bonus depreciation. She is unsure whether immediately expensing the equipment or using straight-line depreciation is better for the analysis. 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 company's WACC is 8%, and its tax rate is 20%. What would...
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 $950,000 of equipment and is eligible for 100% bonus depreciation. She is unsure whether immediately expensing the equipment or using straight-line depreciation is better for the analysis. 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 company's WACC is 10%, and its tax rate is 30%. What would...
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 $475,000 of equipment and is eligible for 100% bonus depreciation. She is unsure whether immediately expensing the equipment or using straight-line depreciation is better for the analysis. 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 company's WACC is 8%, and its tax rate is 20%. a. What...
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 $325,000 of equipment and is eligible for 100% bonus depreciation. She is unsure whether immediately expensing the equipment or using straight-line depreciation is better for the analysis. 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 company's WACC is 8%, and its tax rate is 30%. a. What...
Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $125,000 of equipm...
Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $125,000 of equipment and is eligible for 100% bonus depreciation. She is unsure whether immediately expensing the equipment or using straight-line depreciation is better for the analysis. 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 company's WACC is 9%, and its tax rate is 25%. What would...
6. Problem 12.06 (Depreciation Methods) eBook Kristin is evaluating a capital budgeting project that should last...
6. Problem 12.06 (Depreciation Methods) eBook Kristin is evaluating a capital budgeting project that should last for 4 years. The project requires $950,000 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...
6. Problem 12.06 (Depreciation Methods) eBook Kristin is evaluating a capital budgeting project that should last...
6. Problem 12.06 (Depreciation Methods) eBook Kristin is evaluating a capital budgeting project that should last for 4 years. The project requires $200,000 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...
DEPRECIATION METHODS Charlene is evaluating a capital budgeting project that should last for 4 years. The...
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...
5. Problem 12.06 (Depreciation Methods) eBook Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $975,000 of equipment and is eligible for 100% bonus depreciation. She is unsure whether immediately expensing the equipment or using straight-line depreciation is better for the analysis. 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 company's WACC is 8%, and its...
Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $225,000 of equipment and is eligible for 100% bonus depreciation. She is unsure whether immediately expensing the equipment or using straight-line depreciation is better for the analysis. 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 company's WACC is 12%, and its tax rate is 30%. a. What...
Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $325,000 of equipment and is eligible for 100% bonus depreciation. She is unsure whether immediately expensing the equipment or using straight-line depreciation is better for the analysis. 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 company's WACC is 8%, and its tax rate is 30%. a. What...
6. Problem 12.06 (Depreciation Methods) eBook Kristin is evaluating a capital budgeting project that should last for 4 years. The project requires $950,000 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...
6. Problem 12.06 (Depreciation Methods) eBook Kristin is evaluating a capital budgeting project that should last for 4 years. The project requires $200,000 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...
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...
Most questions answered within 3 hours.
-
Write a c/c++ program to read a list of students from a file and
create a...
asked 4 minutes ago -
Identify two different methods for collecting data in
qualitative research. What are the benefits and challenges...
asked 5 minutes ago -
I am suppose to have my array before the main class but I am
getting the...
asked 7 minutes ago -
Your task is to design the page table for the 32bit Pentium
microprocessor. Answer the following...
asked 14 minutes ago -
The Paradise Shoes Company has estimated its weekly TVC function
from data collected over the past...
asked 12 minutes ago -
A researcher wishes to study the cumulative effects of several
combinations of HIV drugs. There are...
asked 12 minutes ago -
Although Epicurus advocates pursuing pleasure for the
good life, discuss a few reasons why he does...
asked 30 minutes ago -
Problem 1: Present entries to record the selected transactions
described below:
(a)
Issued $2,790,000 of 5-year,...
asked 36 minutes ago -
Using technology to support HR activities increases:
a.
the efficiency of the administrative HR functions.
b....
asked 37 minutes ago -
1. List the features used to classify leaf
types.
2. List some characteristics that are shared...
asked 42 minutes ago -
The three elements of Value Proposition, Key Customers, and
Capabilities operate within an environment. Which of...
asked 44 minutes ago -
Katelynn, a physician, earns $200,000 from her medical practice
in the current year. She receives $45,000...
asked 52 minutes ago