Guess which depreciation method will have the lower 10%-per-year PW of taxes between the following methods over a 6-year study period: P = $100, S = 0, and GI-OE = $50, and Te = 30%. Verify your answer via spreadsheet.

I. Straight line with n = 4 years
II. MACRS with n = 5 years
III. DDB with n = 6 years


Did you guess correctly that SL with n = 4 years will be slightly lower in PW of taxes? The shorter recovery period overrides the accelerated write-off in this case.

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