Suppose a corporation can change its depreciation method so that its tax payments will decrease by $5,000 this year but increase by $5,000 next year.
A) The change will have no impact on the value of the company because its cash flow over time will be th

D) The change will increase the value of the company because the value of the cash savings this year exceeds the cost of the cash payments next year. The decrease in taxes this year provides an immediate increase in the company's cash, whereas the increase in taxes next year only represents a future cash cost. So, the net present value of the change is positive, meaning it should increase the value of the company overall.