Question
For a typical $280,000 investment in equipment with a five-year life and no salvage value, determine the present value of the advantage resulting from the
For a typical $280,000 investment in equipment with a five-year life and no salvage value, determine the present value of the advantage resulting from the use of double-declining balance depreciation as opposed to straight-line depreciation. Assume an income tax rate of 21% and a discount rate of 20%. Also assume that there will be a switch from double-declining balance to straight-line depreciation in the fourth year.
Note: Round your answers below to the nearest whole dollar.
Present value of double-declining balance tax shield
Present value of straight-line tax shield
Advantage of double-declining balance depreciation
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