A company used the net-present-value method to analyze an investment and found the investment to be very attractive.If the firm used Modified Accelerated Cost Recovery System (MACRS)and changes to the straight-line depreciation,the investment's net present value will:

Question

Quizplus · Accepted Answer

Switching from MACRS to straight-line depreciation will decrease the net present value because MACRS allows for higher depreciation expenses in the early years, leading to higher tax savings and cash flows earlier, which are more valuable in present value terms.

A Company Used the Net-Present-Value Method to Analyze an Investment