Flex Corporation Is Studying a Capital Investment Proposal in Which

Multiple Choice

Flex Corporation is studying a capital investment proposal in which newly acquired assets will be depreciated using the straight-line (SL) method with no salvage value. Which one of the following statements about the proposal would be incorrect if, instead of SL, the Modified Accelerated Cost Recovery System (MACRS) is used for determining depreciation expense for income tax purposes? (Assume that income tax rates are constant over the life of the assets involved.)

A) The estimated net present value (NPV) of the project would increase.
B) The internal rate of return (IRR) of the project would likely increase.
C) The payback period for the investment would be shortened.
D) The total after-tax income from this project, over its life, would normally increase.
E) Total tax payments over the life of the project would be unaffected.