Which depreciation method would produce the higher npv, Financial Accounting

Assignment Help:

Wendy is evaluating a capital budgeting project that should last for 4 years. The project requires $ 800,000 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%, as discussed in Appendix 11A of our text book. The company's WACC is 10%, and its tax rate is 40%.
a. What would the depreciation expense be under each year under each method? (I have already answered this part of the question)
b. Which depreciation method would produce the higher NPV, and how much higher would it be?


Related Discussions:- Which depreciation method would produce the higher npv

Which transaction results in an increase in revenues, Which of the followin...

Which of the following transaction results in an increase in revenues? a. receipt of accounts receivable b. purchase of inventory c. receipt of principal from bank loan d. delivery

Evaluating the results of testing, Use of Professional Skepticism when Eval...

Use of Professional Skepticism when Evaluating the Results of Testing - AUDITOR should conduct the audit of internal control over financial reporting and audit of financial stateme

Combined income statement-branches, Combined income statement The figur...

Combined income statement The figures to appear in the combined income statement are based on the following diagram: 1) An arrow pointing into a box refers to purchase

Accounts relate to keenal real estate, Prepare a financial statement from a...

Prepare a financial statement from alphabetic listing of accounts: A number of accounts balances are listed below these accounts relate to Keenal Real Estate. During the year just

Determine the net present value for the project, An investment project requ...

An investment project requires a net investment of $100,000. The project is expected to generate annual net cash inflows of $28,000 for the next 5 years. The firm's cost of capital

Determine the optimum combination of milk and biscuits, 1. Jim buys only mi...

1. Jim buys only milk and biscuits.    (a) In 2004, Jim earns $100, milk costs $2, biscuits cost $4 per dozen. Draw Jim's budget constraint  (b) Now suppose that all prices i

Show the calculations and journal entries, In the current year, Company A i...

In the current year, Company A is formed with $630,000 in capital from the sale of 21,000 shares of stock at $30 a share. Company A, which has no other operations, immediately acqu

Income statement-group accounts, Normal 0 false false false...

Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4

Which actions are most likely to directly increase cash, Which of the follo...

Which of the following actions are most likely to directly increase cash as shown on a firm's balance sheet? Explain and state the assumptions that underlie your answer. 1. It i

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd