Markov Manufacturing recently spent $ $18$ 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$$ years, and its corporate tax rate is $35\%.$ The company plans to use$$ 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$$ straight$-$line depreciation, suppose Markov will use the MACRS depreciation method for$$ five$-$year 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$$ constant, which should it$$ choose? $$ Why?$$

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

Question content area bottom

Part $1$

a$.$ What is the annual depreciation expense associated with this$$ equipment?

The annual depreciation expense is $$$

$$

enter your response here million.$($Round to three decimal$$ places.$)$