Now assume that the facts in problem 1 remain unchanged except for the depreciation method, which is

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Now assume that the facts in problem 1 remain unchanged except for the depreciation method, which is switched to an accelerated method with the following depreciation schedule:

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Depreciable Asset = Initial Investment - Salvage Value

a. Estimate the pre-tax return on capital, by year and on average, for the project.

b. Estimate the after-tax return on capital, by year and on average, for the project.

c. If the firm faced a cost of capital of 12%, should it take this project?

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Applied Corporate Finance A Users Manual

ISBN: 9780471660934

2nd Edition

Authors: Aswath Damodaran

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Question Posted: May 22, 2024 06:00 AM

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Now assume that the facts in problem 1 remain unchanged except for the depreciation method, which is

Question:

Year % of Depreciable Asset 21 1 40% 3 24% 14.4% 4 13.3% 5 13.3%

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Applied Corporate Finance A Users Manual

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