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Merrill Lynch: Accelerated Depreciation Will Produce Spending Spree

By John S. McClenahen The temporary 50% accelerated depreciation allowance that runs through Dec. 31 could produce a late-2004 business spending spree comparable to the capital investment boom that preceded Y2K, believes Merrill Lynch & Co., New York. Merrill expects makers of informational processing machinery and software to be among the beneficiaries of the spending spree. The accelerated allowance applies to equipment with a depreciable life of 20 years or less and installed between May 5, 2003, and Jan. 1, 2005. The accelerated allowance allows companies to write off more of their depreciation expenses in the first year, which reduces their tax liability and increases cash flow.

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