Charlene is evaluating capital budgeting project

Assignment Help Financial Management

Reference no: EM132033990

DEPRECIATION METHODS Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $300,000 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 rate is 40%. 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 $ $ 2 3 4 Which depreciation method would produce the higher NPV? How much higher would the NPV be under the preferred method? Round your answer to two decimal places. Do not round your intermediate calculations.

Reference no: EM132033990

Questions Cloud

Should blueberry undertake this investment project : (Country Risk and Capital Investment) Blueberry Farm Inc. (U.S. firm) is planning a project in Japan. Should Blueberry undertake this investment project?

The risky asset to form portfolio with expected return : How much money should be invested in the risky asset to form a portfolio with an expected return of 11%?

What is initial investment outlay for spectrometer : What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow?

Outlay for machine for capital budgeting purposes : What is the initial investment outlay for the machine for capital budgeting purposes, that is, what is the Year 0 project cash flow?

Charlene is evaluating capital budgeting project : DEPRECIATION METHODS Charlene is evaluating a capital budgeting project that should last for 4 years.

The efficient market hypothesis implies that : The efficient market hypothesis implies that

What is the equipment after-tax salvage value : Karsted Air Services is now in the final year of a project. What is the equipment's after-tax salvage value?

What is the equipment after-tax salvage value : Karsted can sell the used equipment today for $8.75 million, and its tax rate is 35%. What is the equipment's after-tax salvage value?

The purchase of proposed spectrometer : You must evaluate the purchase of a proposed spectrometer for the R&D department. If the WACC is 11%, should the spectrometer be purchased?

User Account

All Pages