The present value at any given discount rate of the depreciation tax shield is:
A)equal for all depreciation methods.
B)higher with MACRS than straight-line depreciation.
C)higher for the tenth year than the seven-year recovery period class.
D)likely to increase annually due to inflation.

Question

Quizplus · Accepted Answer

The Modified Accelerated Cost Recovery System (MACRS) allows for accelerated depreciation, which means larger depreciation expenses in the earlier years compared to straight-line depreciation. This results in a higher present value of the depreciation tax shield under MACRS.

The Present Value at Any Given Discount Rate of the Depreciation