Evaluating capital budgeting project

Assignment Help Financial Management

Reference no: EM131552398

Depreciation methods Charlene 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 company's WACC is 10%, 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: EM131552398

Questions Cloud

What is the firms optimal capital budget : What is the firm's optimal capital budget in this case? What is the firm's optimal capital budget? What is the firm's optimal capital budget in this case?

What is standard deviation and variance of this portfolio : What is the variance of this portfolio? What is the standard deviation? What is the expected return of the portfolio?

Use any test to determine whether the series is absolutely : Use any test to determine whether the series is absolutely convergent, conditionally convergent, or divergent.

Find the capacitance of a parallel plate capacitor : Find the capacitance of a parallel plate capacitor if the area of each plate is 0.075 m2 and the distance between the plates is 1.77 mm. The dielectric is air.

Evaluating capital budgeting project : Depreciation methods Charlene is evaluating a capital budgeting project that should last for 4 years. Which depreciation method would produce the higher NPV?

What is the equipment after-tax salvage value : Karsted can sell the used equipment today for $6.75 million, and its tax rate is 30%. What is the equipment's after-tax salvage value?

Estimate first-year cash flow for proposed project : Project cash flow Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project.

Company is analyzing two mutually exclusive projects : A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: What is the IRR of the better project?

Find the work done by the force field f : Find the work done by the force field F (x,y,z) = (x-y2 y-z2, z-x2) on a particle that moves along the line segment (0,0,1) to (2,1,0).

User Account

All Pages