8.5

- 4. 5. eBook 6. 7. A-Z o ne de give hi could st ofte Depreciation Methods Wendy's boss wants to use straight-line depreciation for the new expansion project because he said it will give higher net income in earlier years and give him a larger bonus. The project will last 4 years and requires $1,700,000 of equipment. The company could use either 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 33.33%, 44.45%, 14.81%, and 7.41%. The project cost of capital is 9%, and its tax rate is 35%. a. What would the depreciation expense be each year under each method? Enter your answers as positive values. Do not round Intermediate calculations. Round your answers to the nearest dollar depr give hi could ost oft Scenario 1 (Straight Line) $ Scenario 2 (MACRS) Year ove P 1 $ 2 $ $ 3 $ $ 4 $ $ b. Which depreciation method would produce the higher NPV, and how much higher would it be? Do not round intermediate calculations. Round your answer to the nearest cent. The NPV unde Select- will be higher by Scenario 1 Scenario 2 A Inve Indu laun The equr