Edit question A cente has a 7years contract Cost of special equipment needed now 500000 Initial supply of lubricants: 90000 Net annual operating cash flow: 150000 Salvage value of equipment in 7 years: 25000 The special equipment is in 5years property class. Thw tax rate is 30% for ordinary income and 15% for capital gain. the center after tax cost of capital is 16%.

Suppose that the special equipment is depreciated for the tax purpose by optional straight-line method. What is the present value of the tax saving arising the depreciation tax shild