h 12: End-of-Chapter Problems - Cash Flow Estimation and Risk Analysis Back to Assignment Attempts: Keep the Highest: / 10 4. Problem 12.06 Click here to read the eBook: Analysis of an Expansion Project DEPRECIATION METHODS Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $475,000 of equipment. She is unsure what depreciation method to use in her analysis, 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%, 45%, 15%, and 7%. The company's WACC is 14%, and its tax rate is 30%. a. What would the depreciation expense be each year under each method? Round your answers to the nearest cent. Year Scenario 1 (Straight-Line) $ Scenario 2 (MACRS) 1 2 3 4 b. Which depreciation method would produce the higher NPV? Select How much higher would the NPV be under the preferred method? Round your answer to two decimal places. Do not round your intermediate calculations. $ Grade it Now Save Continue