Question
Delta Inc. is evaluating a new product. The production line for the new product would be set up in an unused plant, which was purchased
Delta Inc. is evaluating a new product. The production line for the new product would be set up in an unused plant, which was purchased one year ago at $300,000. The machinery will cost $220000. The company's inventories would have to be increased by $25000 to handle the new line. The machinery is in Class 43 with a depreciation rate of 30%. The project is expected to last 3 years with estimated EBITDA of $180000 in each year. The machinery has an expected salvage value of $29000 at the end of three years. The company's tax rate is 30% and its weighted average cost of capital is 10%. What is the present value of depreciation tax shields due to salvage in the terminal year? Round to the nearest dollar. For example, if your answer is 98765.4321, enter 98765 without the dollar sign.
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