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?
