Bonus Depreciation and its Effect on Net Present Value in Relation to Capital Purchases

Abstract

Specifically, this case will examine how a change from 50% to 100% bonus depreciation affects purchasing decisions between asset classes, due to the exaggerated impact on the net present value for longer lived assets. In keeping with the evolution of accounting in academia, students will be asked both to solve a realistic problem and to communicate their investment decisions effectively. To prepare students for the assignment, the informational building blocks are presented in modules following Bloom’s taxonomy – culminating in the application of the concepts in a decision-making scenario. The learning method applied in this case has been tested in the classroom, with quantifiable results showing a positive learning outcome. Pre- and post-case assessment questions were administered with significant improvement in students reported understanding across all six measures. Based on these results, this case achieves the dual goals of teaching students how to apply the concept of bonus depreciation to maximize value and how to communicate this information effectively.

Citation

Mueller, M.A., Stott, F.A. and Wilson, A.B. (2020), "Bonus Depreciation and its Effect on Net Present Value in Relation to Capital Purchases", Calderon, T.G. (Ed.) Advances in Accounting Education: Teaching and Curriculum Innovations (Advances in Accounting Education, Vol. 24), Emerald Publishing Limited, pp. 67-87. https://doi.org/10.1108/S1085-462220200000024010

Download as .RIS