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Select -> Scenario 1 or 2 Wendy's boss wants to use straight-line depreciation for...

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Finance

imageSelect -> Scenario 1 or 2

Wendy's boss wants to use straight-line depreciation for the new expansion project because he said it will give higher net income in earlier years and give him a larger bonus. The project will last 4 years and requires $1,650,000 of equipment. The company could use either straight-line or the 3-year MACRS accelerated method. 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 applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. The project cost of capital is 8%, and its tax rate is 40%. a. What would the depreciation expense be each year under each method? Enter your answers as positive values. Do not round intermediate calculations. Round your answers to the nearest dollar. Scenario 2 (MACRS) Year Scenario 1 (Straight Line) $ $ 1 $ 2 3 4 $ $ $ b. Which depreciation method would produce the higher NPV, and how much higher would it be? Do not round intermediate calculations. Round your answer to the nearest cent. The NPV under -Select- will be higher by $

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