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Chemise is evaluating a capital budgeting project that will last for 4 years. The project...

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Finance

Chemise is evaluating a capital budgeting project that will last for 4 years. The project requires $375,000 of equipment. She is wondering about which depreciation method will be better, straight-line or MACRS. The MACRS rates are 33%, 45%, 15%, and 7% over years 1 to 4, respectively. The company's WACC is 10% and its marginal tax rate is 27%. Which method would produce the higher NPV and how much higher would it be?

MACRS will produce a higher NPV and it will be 2,841.26 higher

MACRS will produce a higher NPV and it will be 3,339.60 higher

MACRS will produce a higher NPV and it will be 4,044.19 higher

Straight-line depreciation will produce a higher NPV and it will be 2,841.26 higher

Straight-line depreciation will produce a higher NPV and it will be 3,339.60 higher

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