Visby Rides, a livery car company, is considering buying some new luxury cars. After extensive research, they come up with the above estimates of free cash flow from this project. The depreciation schedule shown is for three-year, straight-line depreciation. By how much would the net present value (NPV) of this project be increased, if the cars were depreciated by the MACRS schedule shown below given that the cost of capital is 10%?

Question

Quizplus · Accepted Answer

B) NPV straight-line depreciation = $303,062
NPV MACRS depreciation = $312,144
Difference = $9082
 11eaabab_c098_ad3c_b90e_f118ac263b78_TB5536_00 NPV $303,062
 11eaabab_c098_ad3d_b90e_bbd9baffd0ad_TB5536_00 NPV $312,144
$312,144 - $303,062 = $9082

Visby Rides, a Livery Car Company, Is Considering Buying Some