Wendy capital budgeting project NPV IRR WACC MACRS
Wendy is evaluating a capital budgeting project that should last for 4years. 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 Appendix11A. The company 's WACC is 10%,and its tax rate is 40%.
a. What would the depreciation expense be each year under each method?
b. Which depreciation method would produce the higher NPV, and how much higher would it be?© SolutionLibrary Inc. solutionlibary.com July 11, 2020, 7:11 pm 9836dcf9d7 https://solutionlibrary.com/business/finance/wendy-capital-budgeting-project-npv-irr-wacc-macrs-f4pi