Evaluating capital budgeting project

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Reference no: EM131084552

Depreciation methods Kristin 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 11%, and its tax rate is 35%. What would the depreciation expense be each year under each method? Round your answers to the nearest cent. YEAR 1-4 Scenario 1 (straight-line) Scenario 2 (MACRS) 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.

Reference no: EM131084552

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Evaluating capital budgeting project : Depreciation methods Kristin 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 accelera..

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