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Currently, your firm plans on depreciating an upcoming project’s PPE from an initial value of $800k...

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Finance

Currently, your firm plans on depreciating an upcoming project’sPPE from an initial value of $800k to a final book value of $100kover a 10 year period. You’ve been asked to value a possible changein the depreciation scheme which will accelerate this process bydepreciating the machine over a 6 year period (let’s assume this islegal to do). If you accelerate depreciation, you will still bedepreciating to a final book value of $100k. If the project’sdiscount rate is 12% and the firm’s tax rate is 35%, by how muchwill the project’s NPV change if you switch to the accelerateddepreciation schedule?

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3.8 Ratings (711 Votes)
If we want to have the salvage value of 100K then we willdeduct this from the cost of 800k to find the annualdepreciationDepreciation schedules are as follows when the    See Answer
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