The Impact of Bonus Depreciation on Project Decision Making

Financial Decisions, Article 2, Winter 2011

20 Pages Posted: 25 Jan 2011 Last revised: 17 Apr 2018

See all articles by Gregory A. Kuhlemeyer

Gregory A. Kuhlemeyer

Carroll University

John M. Wachowicz

University of Tennessee - Knoxville

Date Written: January 24, 2011

Abstract

This paper develops an Excel model – useful to students, academics, and business professionals - that values the impact of government driven increases in temporary first-year depreciation allowances, known as bonus depreciation. Bonus depreciation is a temporary measure that has been used as a tool to stimulate economic activity by directly affecting the profitability and payback of a project and thereby impacting the investment decision of managers. We develop an evaluation technique, using net present value (NPV), that integrates the effects of bonus depreciation in a flexible model that can be used to determine the ultimate change on a project's base NPV.

Keywords: bonus depreciation, simulation, Excel

JEL Classification: A22, A23, G30, G31

Suggested Citation

Kuhlemeyer, Gregory A. and Wachowicz, John M., The Impact of Bonus Depreciation on Project Decision Making (January 24, 2011). Financial Decisions, Article 2, Winter 2011. Available at SSRN: https://ssrn.com/abstract=1747172

Gregory A. Kuhlemeyer

Carroll University ( email )

100 N. East Ave - Voorhees 306
Waukesha, WI 53186
United States

John M. Wachowicz (Contact Author)

University of Tennessee - Knoxville ( email )

Knoxville, TN 37996
United States
865-974-1729 (Phone)

HOME PAGE: http://web.utk.edu/~jwachowi/wacho_hp.htm

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