Final answer:
The student's question involves a business decision concerning the purchase of $40 million capital equipment and its straight-line depreciation over five years, resulting in an annual depreciation of $8 million.
Step-by-step explanation:
The question revolves around a decision-making scenario in which the firm is considering a project that involves a significant equipment purchase with associated capital costs and depreciation schedules. When a firm buys capital equipment, it expects to use that equipment to generate profits in the future. Depreciation is the distribution of the cost of an asset, in this case, capital equipment, over its useful life. Here's how we can calculate the straight-line depreciation for the equipment: The total cost of the equipment is $40 million, and the equipment will be depreciated over five years. So, the annual depreciation expense would be the total cost divided by the number of years, which would be $8 million per year ($40 million / 5 years).