CleanWater Systems, a water treatment technology company, is a potential acquisition target for PE Ventures, a private equity firm. In 2022, CleanWater procured a new treatment plant for $100 million. Considering the provisions of the 2017 Tax Cuts and Jobs Act (TCJA) on bonus depreciation, which of the following best describes how the private equity firm would view this acquisition from a cash flow and return perspective?

• The full bonus depreciation would lead to a significant tax shield in the initial years, potentially improving free cash flows, allowing for quicker debt paydown, and enhancing IRR.
• The 100% bonus depreciation would increase the firm's tax liability due to the immediate recognition of the entire asset's cost, thereby reducing the initial years' cash flows and impacting the deal's return profile negatively.
• The bonus depreciation would have no material impact on the deal as the tax benefits are evenly spread out over the asset's useful life.
• The immediate depreciation would reduce the firm's overall asset value, making it harder for PE Ventures to raise debt against the company's assets, thereby decreasing leverage and potentially reducing IRR.