Fish Corporation plans to acquire fishing equipment for $600,000 that will depreciated for tax purposes as follows:

Question:

Fish Corporation plans to acquire fishing equipment for $600,000 that will depreciated for tax purposes as follows: year 1, $120, 000; year 2, $210,000; year 3-5, $90,000 per year. Fish Corp. uses an 8% discount rate for this type of assets and the company`s tax rate is 40%. Compute the present value of the tax shield resulting from depreciation?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...