Markov Manutacturing recently spent $20 million to purchase some equipment used in the manufacture of dink drives. The firm expects that this equipment will have a useful life of five years, and its corporate fax rate is 20%. 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? e. 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 it Markov anticipates that its marginal corporate tax rate will change substantially over the next five years? 2. What is the annual depreciation expense associated wth this equipment? The annual depreciation expense is smilien (Round to theee decimal places.) b. What is the annual depreciation tax shield? The annual depreciation tax shield is 3 milon (Round to three decimal places) 6. 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 The depreciation tox shield year os 5 milion (Round to three decimal places) The depreciation to shield year is 5 milion (Round to three decimal places) The depreciation tax shield year 2 million (Round to twee decimal places. The depreciation tax shield year 3 is smilion (Round to three decat places) The depreciation tax shield year is sl million (Round to three decimal places) The depreciation tax shield year 6 million (Round to three decimal places 7 dit 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? (Select the best choice below) OA With straight-line depreciation, the firm's depreciation expenses are lower Intially, leading to higher earnings. Thus, straight-line depreciation leads to a higher NPV of Markov's FCF OB. With either method, the total depreciation tax shield is the same. Therefore, it does not matter which method is used OC. With MACRS, the firm receives the depreciation tax shled sooner. Thus, MACRS depreciation wnds to a higher NPV of Markdo FCF OO None of the above 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? (Select the best choice below) On Markoy may be beter off using the straight-line method if it expect its tax rate to increase substantially in later years OB. Even if its tax rate is expected to change, Markov is better off using MACR depreciation rather than straight-line depreciation CMarkov may be better off using the straight-line method if it expects its taxe rate to decrease substantially in later years. 0 None of the above