#4 (18 mharks) Tire Village Cormpany wants to purchase brand new equipment for their shop for $300,000. Its physical life is 20 years. The company's real interest rate is 8.1% and its marginal corporate tax rate is 40%. The return on this purchase is 15%. In your calculations always round all your numbers to no less than 3 decimal points. If the government requires the company to use the straight-line method of depreciation to write the cost off during the next 6 years, what is the value of y? What is the user cost of capital? Should Tire Village make this purchase? rks) (a) rks) (b) If the government requires them to use the declining balance depreciation method as follows: the write off has to take place at the rate of 25%, whenever a balance of less than $55,000 is left it can be written off fully in the subsequent year. What is the present value of tax savings per dollar of expenditure, y? What is the user cost of capital? Should Tire Village make this purchase? If the government requires them to use the declining expenditure balance fraction rks) (c) method of depreciation: of the cost can be deducted the first year, and for every subsequent year the numerator drops by 6 (e.g. the second year fraction is 42 168 36 etc.) until the equipment is fully depreciated. What is the value of v now? 168 What is the user cost of capital? Should Tire Village make this purchase? How the best depreciation method among (a), (b) and (c) compares to expensing in terms of both UCC rate as well as the UCC dollar amount? What ITC rate should the government provide to make this depreciation method as good as or better than expensing? (d)