Switch to the accelerated depreciation schedule

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Reference no: EM131829179

Currently, your firm plans on depreciating an upcoming project’s PPE from an initial value of $800k to a final book value of $100k over a 10 year period. You’ve been asked to value a possible change in the depreciation scheme which will accelerate this process by depreciating the machine over a 6 year period. If the project’s discount rate is 12% and the firm’s marginal tax rate is 35%, by how much will the project’s NPV change if you switch to the accelerated depreciation schedule? Please list the formulas involved in solving this question.

Reference no: EM131829179

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