F20 BUSI FOGO FUNDAMENTALS OF FINANCE 01W Wang 20655 Bharat Patel 11/22/20 6:25 Homework: HW9 - Chapter 9 Homework Score: 0 of 10 pts 9 of 9 { complete) HW Score: 88.89%, 80 of P 9-27 (similar to) Question Help Markow Manufacturing recently spent $13.3 milion to purchase some equipment used in the manufacture of risk drives. The fim expects that this quipment will have a useful life of five years, and its marginal corporate tax rate is 21%. The company plans to use straight-line depreciation a. What is the annual depreciation Expense associated with this equipment? b. What is the annual depreciation tax shield? c. Rather than straight-ine deprecation, suppose Markov will use the MACRS depreciation method for the five-year lite of the property. Calculate the depreciation tax shield each year for this equipment under this accelerated depreciation schedule. d. If Markov has a choice between straight-line and MACRS depreciation schedules, and its marginal corporate tax rate is expected to remain constant, which schedule should I choose? Why? e. How might your answer to part (d) change if Markov anticipates that ite marginal corporate tax rate wil increase substantially over the next five years? Note. Assure Diarie equipment le pur into wes in year 1. a. What is the annual cepreciation expense associated with this equipment? The annual depreciation expense is S 2.650 million. (Round to three decimal places. b. What is the annual depreciation tax shield? The annual depreciation tax shield is $ 0.556 million. (Round to three decimal places.) c. Rather than straight-ina depreciation, suppose Markov will use the MACRS depreciation method for the five-year life of the property Calculate the depreciation tax shield each year for this equipment under this accelerated depreciation schedule, The depreciation tax shield for year 1 is $ million. (Round to three decimal places.) F20 BUSI FOGO FUNDAMENTALS OF FINANCE 01W Wang 20655 Bharat Patel 11/22/20 6:25 Homework: HW9 - Chapter 9 Homework Score: 0 of 10 pts 9 of 9 { complete) HW Score: 88.89%, 80 of P 9-27 (similar to) Question Help Markow Manufacturing recently spent $13.3 milion to purchase some equipment used in the manufacture of risk drives. The fim expects that this quipment will have a useful life of five years, and its marginal corporate tax rate is 21%. The company plans to use straight-line depreciation a. What is the annual depreciation Expense associated with this equipment? b. What is the annual depreciation tax shield? c. Rather than straight-ine deprecation, suppose Markov will use the MACRS depreciation method for the five-year lite of the property. Calculate the depreciation tax shield each year for this equipment under this accelerated depreciation schedule. d. If Markov has a choice between straight-line and MACRS depreciation schedules, and its marginal corporate tax rate is expected to remain constant, which schedule should I choose? Why? e. How might your answer to part (d) change if Markov anticipates that ite marginal corporate tax rate wil increase substantially over the next five years? Note. Assure Diarie equipment le pur into wes in year 1. a. What is the annual cepreciation expense associated with this equipment? The annual depreciation expense is S 2.650 million. (Round to three decimal places. b. What is the annual depreciation tax shield? The annual depreciation tax shield is $ 0.556 million. (Round to three decimal places.) c. Rather than straight-ina depreciation, suppose Markov will use the MACRS depreciation method for the five-year life of the property Calculate the depreciation tax shield each year for this equipment under this accelerated depreciation schedule, The depreciation tax shield for year 1 is $ million. (Round to three decimal places.)
