A firm that bases its capital budgeting decisions on either NPV or IRR will be more likely to accept a given project if it uses accelerated depreciation than if it uses straight-line depreciation, other things being equal.

Question

Quizplus · Accepted Answer

This is because accelerated depreciation results in higher tax savings in the earlier years of the project, which increases the cash flows in those years and therefore increases the NPV and IRR of the project.

A Firm That Bases Its Capital Budgeting Decisions on Either