A shipping company is considering opening up a new shipping line. It will have to purchase two ships. The purchase cost of each ship is 14,000. The life span of the new shipping line business is 7 years. Incremental revenue is expected to be 7,000 in the first year with a 4% growth each year thereafter. The annual maintenance cost is expected to be 1,000. Salvage value for each ship at the end of the business is zero. Straight-line depreciation to zero salvage value is used. The cost of capital is 10%. What is the maximum value of the corporate tax rate TC at which this investment opportunity will be profitable? Suggestion. Follow these steps. First, determine the PV of the incremental pre-tax revenue and maintenance cost. Second, determine the value of the depreciation tax shield per machine in terms of TC. Third, determine the net equipment cost to acquire the ships in terms of TC, i.e., the acquisition price less the value of the depreciation tax shield and the value of any salvage. Finally, put it all together to determine the project value in terms of TC.