Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $325,000 of equipment and is eligible for 100% bonus depreciation. She is unsure whether immediately expensing the equipment or using straight-line depreciation is better for the analysis. 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 company's WACC is 9%, and its tax rate is 30%.
Year | Scenario 1 (Straight-Line) |
Scenario 2 (Bonus Depreciation) |
0 | $ | $ |
1 | $ | $ |
2 | $ | $ |
3 | $ | $ |
4 | $ | $ |
Get Answers For Free
Most questions answered within 1 hours.