Question: A firm must decide between two silicon layer chip designs from Intel. Their effective income tax rate is 40%, and MACRS-GDS depreciation is used. a)

A firm must decide between two silicon layer chip designs from Intel. Their effective income tax rate is 40%, and MACRS-GDS depreciation is used.

a) If the desired after-tax return on investment is 10% per year, which design should be chosen if repeatability assumption applies?

b) If the company is also qualified for using ADS method for depreciation of this design, which depreciation method should the company choose? A firm must decide between two silicon layer chip designs from Intel.

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