Question
1. Your firm needs a machine which costs $160,000, and requires $37,000 in maintenance for each year of its 5 year life. After 5 years,
1. Your firm needs a machine which costs $160,000, and requires $37,000 in maintenance for each year of its 5 year life. After 5 years, this machine will be replaced. The machine falls into the MACRS 5-year class life category. Assume a tax rate of 21% and a discount rate of 14%. What is the depreciation tax shield for this project in year 5?
2. Your firm needs a machine which costs $240,000, and requires $39,000 in maintenance for each year of its 3 year life. After 3 years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 21% and a discount rate of 12%. What is the depreciation tax shield for this project in year 3?
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Corporate Finance
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
13th Edition
1260772381, 978-1260772388
