Problem 6-18 Depreciation and project NPV Suppose that Sudbury Mechanical Drifters is proposing to invest $11.6 million in a new factory. It can depreciate this investment straight-line over 10 years. The tax rate is 40%, and the discount rate is 10%. a. What is the present value of Sudbury's depreciation tax shields? (Enter your answers in millions rounded to 1 decimal place.) Answer is complete and correct. Straight-line Schedule Straight-line, 10-year Tax Shields at 40% TC PV (Tax Shields) at 10% Year Year Year Year Year Year Year Year Year Year 1 2 3 4 Total 5 6 7 8 9 9 10 $ 12$ 12$ 12$ 12$ 12$ 12$ 12$ 12$ 12$ 12$ 11.6 $ 0.5 $ 0.5 $ 0.5 $ 0.5 $ 0.5 $ 0.5 $ 0.5 $ 0.5$ 0.5$ 0.5$ 4.6 $ 0.4$ 0.4 S 0.3 $ 0.3 $ 0.3 $ 0.3 $ 0.2 $ 0.2S 0.2$ 0.2 $ 2.9 b. Suppose that the government allows companies to use double-declining-balance depreciation with the option to switch at any point to straight-line. Now what is the present value of the depreciation tax shields? (Enter your answers in millions rounded to 1 decimal place.) X Answer is complete but not entirely correct. Double decline Schedule Start of Year Book Value Depreciation Tax Shields at 40% TC PV (Tax Shields) at 10% Year Year Year Year Year Year Year Year Year Year 1 2 3 4 5 6 Total 7 8 9 10 $ 11.6$ 9.3$ 7.4s 5.94.83.8 $ 3.0 $ 2.4% $ 1.9X $ 1.6% $ 11.6% $ 2.3 $ 1.9 $ 1.5$ 12$ 1.0 $ 0.8$ 0.6 X $ 0.5 $ 0.4% $ 0.3% $ 10.4 % $ 0.9 $ 0.70.65 0.55 0.4 0.3 0.2% $ 0.2% $ 0.2% $ 0.1% $ 4.1% $ 0.8$ 0.6$ 0.4 S 0.3 $ 0.2 0.2 0.1 S 0.1 $ 0.10.0% $ 3.0