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A fast-food company invests $2.4 million to buy machines for making slurpies. These can be ...

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A fast-food company invests $2.4 million to buy machines for making slurpies. These can be ...

Year 0

Year 1

Year 2

Year 3

MACRS

Depreciation Rate

33.33%

44.45%

14.81%

7.41%

A fast-food company invests $2.4 million to buy machines for making slurpies. These can be depreciated using the MACRS schedule shown above. If the cost of capital is 10%, what is the increase in the net present value (NPV) of the product gained by using MACRS depreciation over straight-line depreciation for three years?

▸ $66,782

▸ $78,084

▸ $34,452

▸ $207,702

Textbook

Fundamentals of Corporate Finance

Edition: 2^nd

Authors: Berk, DeMarzo, Harford

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Thank you, thank you, thank you!

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