Depreciation Sosa Enterprises purchased a new machine for $10,000 to make cork stoppers for wine bottles. The machine has a 3-year recovery period and is expected to have a salvage value of $2,000. For tax purposes, the company can either use the MACRS schedule in the table to calculate depreciation expenses, or it can write off the asset's entire cost this year taking advantage of the tax code's 100% bonus depreciation provision. Comment on how each method influences Sosa's reported earnings, this year and for the next 3 years. Also comment on how each method affects cash flows over the same horizon. Which method do you think Sosa should choose and why?

Depreciation Sosa Enterprises purchased a new machine for $10,000 to make cork stoppers for wine bottles. The machine has a 3-year recovery period and is expected to have a salvage value of $2,000. For tax purposes, the company can either use the MACRS schedule in the table to calculate depreciation expenses, or it can write off the asset's entire cost this year taking advantage of the tax code's 100% bonus depreciation provision. Comment on how each method influences Sosa's reported earnings, this year and for the next 3 years. Also comment on how each method affects cash flows over the same horizon. Which method do you think Sosa should choose and why