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3. Barrel Manufacturing plans to purchase new manufacturing equipment to use in the production of wooden barrels. Barrel Manufacturing estimates it will save $4,200 during
3. Barrel Manufacturing plans to purchase new manufacturing equipment to use in the production of wooden barrels. Barrel Manufacturing estimates it will save $4,200 during each year of the equipment's ten-year life. Barrel's cost of capital is 8% and its tax rate is 30%. Calculate the after-tax net present value of the estimated cash flows. Tax shield from depreciation 4. Buck N Ride Co. is considering the purchase of a mechanical horse for $15,500. Buck N Ride estimates the useful life of the mechanical horse to be 5 years and does not expect to receive any salvage value at the end of its useful life. Buck N Ride uses the straight- line method of depreciation. Buck N Ride's cost of capital is 12% and its tax rate is 35%. Calculate the net present value of the cash savings due to depreciation. 106
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