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

Content of accounts-trusts accounts, Content of accounts Periodical acc...

Content of accounts Periodical accounts should normally consist of:         1.    Balance sheet of the whole trust;         2.    Capital account;         3.    Income account

Prepare the journal book, On January 1, 2014, Offshore Corporation erected ...

On January 1, 2014, Offshore Corporation erected a drilling platform at a cost of $5,420,142. Offshore is legally required to dismantle and remove the platform at the end of its 6

Analyse the economical performance and monetary position, The statement of ...

The statement of comprehensive income for the year ended 31 December 2009 and its comparative is shown below: 2009 2008 $m

Linear Programming Problem using Simple method, Maximize Z= 3x1 + 2X2 Subje...

Maximize Z= 3x1 + 2X2 Subject to the constraints: X1+ X2 = 4 X1 - X2 = 2 X1, X2 = 0

Calculation of efficiency ratios, Calculation of Efficiency ratios  - ...

Calculation of Efficiency ratios  -                     2008 2009 2010 M Net Sales

What is the worst case npv and best case npv, An investment under considera...

An investment under consideration has a payback of seven years and a cost of $724,000. If the required return is 12 percent, what is the worst-case NPV? The best-case NPV? Explain.

Group accounts, Group Accounts A company can have investments in other co...

Group Accounts A company can have investments in other companies in the form of: ordinary shares, preference shares and loan stock. The investment in ordinary shares leads to own

Intra company adjustments-group accounts, INTRA COMPANY ADJUSTMENTS In pr...

INTRA COMPANY ADJUSTMENTS In preparing the consolidated balance sheet, the following items may require adjustments:. 1    Goodwill 2    Unrealized profit on closing inventory 3

Overhead efficiency variance, The following information is for the third qu...

The following information is for the third quarter of this year:   Planned Actual   Production 92,000 units

Discounted present value, A player for a Rice team, Jim Jones, is graduatin...

A player for a Rice team, Jim Jones, is graduating this year and is considering a career in professional sports. The alternative is to work for two years and then attend business s

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