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Nokela Inc. purchases a $20 million cycloconverter for a project. The cycloconverter will be depreciated over four years. Suppose Nokela has two choices for the
Nokela Inc. purchases a $20 million cycloconverter for a project. The cycloconverter will be depreciated over four years. Suppose Nokela has two choices for the depreciation schedule: Schedule A and Schedule B. According to Schedule A, the value of the cycloconverter will decay linearly. According to Schedule B, the value of the cycloconverter will decay faster (40% in year 1, 30% in year 2, 20% in year 3, and 10% in year 4). % value depreciated in Year 1 % value depreciated in Year 2 % value depreciated in Year 3 % value depreciated in Year 4 Schedule A 25% 25% 25% Schedule B 40% 30% 20% 10% 25% Which depreciation schedule leads to higher NPV of Nokela's project? (3 points) O A. Depreciation schedule B leads to higher NPV of Nokela's project. B. The two schedules lead to the same NPV of Nokela's project. C. Depreciation schedule A leads to higher NPV of Nokela's project
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