Spherical Manufacturing recently spent $15 million to purchase some equipment used in the manufacture of disk brakes. This equipment has aCCArate of 25% and Sphericals marginal corporate tax rate is 35%.

a.What are the annualCCAdeductions associated with this equipment for the first five years?

b.What are the annualCCAtax shields for the first five years?

c.What is the present value of the first fiveCCAtax shields if the appropriate discount rate is 10% per year?

d.What is the present value of all theCCAtax shields assuming the equipment is never sold if the appropriate discount rate is 10% per year?

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