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:

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Quizplus · Accepted Answer

Switching from MACRS to straight-line depreciation typically results in lower depreciation expenses in the early years of an asset's life and higher expenses in the later years. This change delays tax deductions, leading to higher taxes in the early years and reducing the present value of the tax shields, thus decreasing the investment's net present value (NPV).

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