Question
5. Problem 12.06 (Depreciation Methods) Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $125,000 of equipment and
5. Problem 12.06 (Depreciation Methods) Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $125,000 of equipment and is eligible for 100% bonus depreciation. She is unsure whether immediately expensing the equipment or using straight-line depreciation is better for the analysis. 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 company's WACC is 11%, and its tax rate is 30%.
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