(E) A shift from straight-line to MACRS depreciation would increase the NPV of a project.
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What is MACRS depreciation?</h3>
- The MACRS depreciation method provides for greater accelerated depreciation over the asset's life.
- This means that the company can take bigger tax deductions in the early years of the asset's life and less in later years.
NVP of a project:
- The difference between the value of cash today and the worth of cash at a future date is referred to as net present value (NPV).
- In project management, NPV is used to estimate if the future financial returns of a project will outweigh the current investment, indicating that the project is worthwhile.
- A switch from straight-line to MACRS depreciation would boost a project's NPV.
As it is given in the description itself, a switch from straight-line to MACRS depreciation would boost a project's NPV.
Therefore, (E) a shift from straight-line to MACRS depreciation would increase the NPV of a project.
Know more about MACRS depreciation here:
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The question you are looking for is given here:
Other things held constant, which of the following would increase the NPV of a project being considered?
a. Making the initial investment in the first year rather than spreading it over the first three years.
b. The project would decrease sales of another product line.
c. An increase in required net operating working capital.
d. An increase in the discount rate associated with the project.
e. A shift from straight-line to MACRS depreciation.
