Question
6. Problem 12.06 (Depreciation Methods) eBook Kristin is evaluating a capital budgeting project that should last for 4 years. The project requires $725,000 of equipment.
6. Problem 12.06 (Depreciation Methods)
eBook Kristin is evaluating a capital budgeting project that should last for 4 years. The project requires $725,000 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%. The company's WACC is 9%, and its tax rate is 35%.
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