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#15. Suppose you are considering purchasing a $240 machine today at t=0. Under existing tax law, you are allowed to deduct $120 at t=0, and
#15. Suppose you are considering purchasing a $240 machine today at t=0. Under existing tax
law, you are allowed to deduct $120 at t=0, and $120 at t=1 as a depreciation cost in your
calculation of taxable income. The appropriate discount rate on all of the firms after-tax cash
flows is 20%. The corporate tax rate is 35%. If the tax laws change so that you are now allowed
to deduct the full $240 cost at t=0, how much will the NPV of the project change as a result of
the tax change? Calculate your answer in t=0 dollar
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