What are the different types of depreciation? What are the advantages and disadvantages of each?
What will be an ideal response?
The two types of depreciation discussed in the text are straight-line and accelerated. The straight-line depreciation method of calculating annual depreciation is the simplest and usually is adequate for internal planning purposes. If the tax shields come earlier, they are worth more. Tax laws allow just that with what is called accelerated depreciation. Since 1986, the only acceptable accelerated depreciation method in the United States is the Modified Accelerated Cost Recovery System (MACRS). MACRS shortens the lives of investments, giving firms larger tax deductions. It requires the firm to categorize their investments into one of six classes, each of which has a recovery period or class life.
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The cost per risk for risks discovered early in the project is often more than the cost per risk for risks discovered late because there is more opportunity for the risk to impact several dimensions of the project
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