Discuss the macrs depriciation

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Reference no: EM131506332

Question: A firm must decide between two silicon layer chip designs from Intel. Their effective income tax rate is 40%, and MACRS depreciation is used. If the desired after-tax return on investment is 10% per year, which design should be chosen? State your assumptions.

                                   Design A Design B
Capital investment    $1,000,000                  $2,000,000
MV at end of useful life    $1,000,000    $1,100,000
Annual revenues less                 $200,000                     $400,000
expenses
MACRS property class    5 years    5 years
Useful life    7 years    6 years

Reference no: EM131506332

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