Markov Manufacturing recently spent $$17\mathrm{.}4$ million to purchase some equipment used in the manufacture of disk drives. The firm expects that this equipment will have a useful life of five years, and its marginal corporate tax rate is $30\%.$ 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$-$line 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.

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 it choose? Why?

e$.$ How might your answer to part $($d$)$ change if Markov anticipates that its marginal corporate tax rate will increase substantially over the next five years?

Note: Assume that the equipment is put into use in year $1.$