DEPRECIATION SCHEDULE
Section a. straight line depreciation
Year 0 1 2 3 4 5 6 7
Earnings before depreciation and taxes 3,000 3,000 3,000 2,500 2,500 2,500 2,500
Depreciation
Earnings before taxes
Tax (34%)
Net operating profit after tax
Capital investment (no salvage value) -10,500 0
Add back depreciation
Free cash flow
Discount rate 11%
NPV
Section b. MACRS depreciation
Year 0 1 2 3 4 5 6 7 8
MACRS depreciation 14.29% 24.49% 17.49% 12.49% 8.93% 8.93% 8.93% 4.45%
Earnings before depreciation and taxes 3,000 3,000 3,000 2,500 2,500 2,500 2,500 0
Depreciation
Earnings before taxes
Tax (34%)
Net operating profit after tax
Capital investment (no salvage value) -10,500 0
Add back depreciation
Free cash flow
Discount rate 11%
NPV