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Suppose that Sudbury Mechanical Drifters is proposing to invest $10 Million in a new factory. It can depreciate this investment straight-line over 10-years. The tax
Suppose that Sudbury Mechanical Drifters is proposing to invest $10 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 Sudburys depreciation tax shields?
B.) What would be the present value of the tax shield if the government allowed Sudbury to write-off the factory immediately?
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