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 10%, and its tax rate is 20%.

1. What would the depreciation expense be each year under each method? Enter your answers as positive values. Round your answers to the nearest dollar.

Year Scenario 1 Scenario 2

0 $------ $------

1 $ $

2 $ $

3 $ $

4 $ $

a. Which depreciation method would produce the higher NPV?

1. -Select-Straight-Line or Bonus Depreciation?

b. How much higher would the NPV be under the preferred method? Do not round intermediate calculations. Round your answer to the nearest dollar.

$-------?