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 fiveyears, and its marginal corporate tax rate is 30%

The company plans to usestraight-line depreciation.

a. What is the annual depreciation expense associated with thisequipment?

b. What is the annual depreciation taxshield?

c. Rather thanstraight-line depreciation, suppose Markov will use the MACRS depreciation method forfive-year property. Calculate the depreciation tax shield each year for this equipment under this accelerated depreciation schedule.

d. If Markov has a choice betweenstraight-line and MACRS depreciationschedules, and its marginal corporate tax rate is expected to remainconstant, which should itchoose? 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 fiveyears?