The tax impact of equipment depreciation affects capital budgeting decisions. Currently, me Modified Accelerated Cost Recover' System (MACRS) is used as the depreciation method for most assets for tax purposes. When employing the MACRS method of depreciation in a capita) budgeting decision, the use of MACRS as compared with the straight-line method of depreciation will result in?
For tax purposes. straight-line depreciation is an alternative to the MACRS method. Both methods will result in the same total depreciation over the life of the asset: however, MACRS will result in greater depreciation in the early years of the assets life because it is an accelerated method. Given that MACRS results in larger depreciation deductions in the earj years, taxes will be lower in the early years and higher in the later years. Because the incremental benefits will be discounted over a shorter period than the incremental depreciation costs. 'MACRS is preferable to the straight-line method,