. Tax Shield. Your boss is considering a new parking lot for employees that will cost ($...

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. Tax Shield. Your boss is considering a new parking lot for employees that will cost \(\$ 200,000\). The company is in the 40 percent tax bracket. Your boss says, "It will only cost us \(\$ 120,000\) after taxes to put in the lot." The firm has a 14 percent cost of capital and would depreciate the lot over eight years using the straight-line method.

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Tell your boss what the net cost, in present value terms, will be to build the new parking lot. Comment on the absence of "benefits."

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Managerial Accounting

ISBN: 9780538842822

9th Edition

Authors: Harold M. Sollenberger, Arnold Schneider, Lane K. Anderson

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