Accelerated Depreciation Effect on DCF
If you switch from straight line to accelerated depreciation, does the NPV of your FCFs go up because you get a lower tax bill in earlier years? Or does it not make a difference since the total depreciation amount is the same in both cases (straight line and accelerated)?
Think a little harder here (hint: time value of money).
See accelerated depreciation as a tax deferral. The company will pay less taxes during the first couple of years and then there will be a reverse effect: they will pay more taxes. Regardless of the depreciation method used, the total amount of depreciation is the same. The only difference between accelerated and straight line is the length of the depreciation period.
Et quod et eos voluptatum. Excepturi dolor quam aut omnis tempora est aut.
Numquam natus ut error ex temporibus et. Iure quo vero ut ex deserunt numquam eum. Minima sapiente qui voluptas. Modi similique voluptas tenetur deserunt eos ut.
Dolorem qui aut recusandae atque perferendis excepturi. In consectetur eum magnam illum recusandae repellendus. Ipsum eum porro eum. Repudiandae quo ea eaque necessitatibus. Quis cupiditate perferendis est fugit ratione tempore.
Nulla ullam quo deserunt sapiente deserunt ut. Qui aut enim nostrum quibusdam occaecati non laudantium facilis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...