Cherryl is evaluating a capital budgeting project that will last for 4 years. The project requires $340,000 of equipment. She is wondering about which depreciation method will be better, straight-line or MACRS. The MACRS rates are 33%, 45%, 15%, and 7% over years 1 to 4, respectively. The company's WACC is 11% and its marginal tax rate is 23%. Which method would produce the higher NPV and how much higher would it be?

You must evaluate the purchase of a proposed spectrometer for your company that will save the company $100,000 per year in before-tax labor costs. The base price is $250,000 but it would cost another $45,000 to make required modifications. Also, $22,000 would need to be spent to add additional net working capital. The equipment would be depreciated using MACRS over a three-year life (rates are 33%, 45%, 15%, and 7%). In three years, it will be sold for an estimated $80,000. The firm's marginal tax rate is 18% and its WACC is 12%. What are the project's total annual cash flows for years 1, 2, and 3, respectively?

Colton Communications' finance department has collected the following information concerning a proposed project: Sales revenues should be $1,800,000, operating costs excluding depreciation should be $1,260,000, depreciation expense should be $216,000, and interest expense should be $90,000. The company's tax rate is 15% and its WACC is 9%. What is the project's first year cash flow (CF1)?

Karroll Air Freight is now in the final year of a project. The project equipment originally cost $1,300,000 and this equipment has now been 72% depreciated. The used equipment can be sold for an estimated $55,000 today. If the tax rate is 20%, what is the equipment's after-tax salvage value (the salvage value minus the tax consequences of the gain or loss)?