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 $$1,660,000$ 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

$33\mathrm{.}33\%,44\mathrm{.}45\%,14\mathrm{.}81\%,$ and $7\mathrm{.}41\%.$ The project cost of capital is $8\%,$ and its tax rate is $25\%.$

a$.$ What would the depreciation expense be each year under each method? Enter your answers as positive values. Do not round intermediat

calculations. Round your answers to the nearest dollar.

Scenario $1$

Scenario $2$

$($MACRS$)$

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 under

will be higher by $