Question
Currently, your firm plans on depreciating an upcoming projects PPE from an initial value of $800k to a final book value of $100k over a
Currently, your firm plans on depreciating an upcoming projects PPE from an initial value of $800k to a final book value of $100k over a 10 year period. Youve been asked to value a possible change in the depreciation scheme which will accelerate this process by depreciating the machine over a 6 year period (lets assume this is legal to do). If you accelerate depreciation, you will still be depreciating to a final book value of $100k. If the projects discount rate is 12% and the firms tax rate is 35%, by how much will the projects NPV change if you switch to the accelerated depreciation schedule?
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