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Suppose that Sudbury Mechanical Drifters is proposing to invest $11.5 million in a new factory. It can depreciate this investment straight-line over 10 years. The

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Suppose that Sudbury Mechanical Drifters is proposing to invest $11.5 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 12%. 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 12% Year Year Year Year Year Year Year Year Year Year 1 1 2 3 4 5 6 7 8 9 10 Total $ 1.2$ 1.2$ 1.2$ 1.2$ 1.2$ 1.2$ 1.2$ 1.21.2$ 1.2$ 11.5 $ $ 0.5 $ 0.5 S 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 $ 0.2 $ $ $ 0.2 0.2 $ 0.2 0.2 $ 0.1$ 2.6 $ 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.) 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 12% Year Year Year Year Year Year Year Year Year Year 1 Total 2 3 4 5 6 7 8 9 10 $ 11.5$ 9.2$ 7.4$ 5.9$ 4.7 $ 3.8$ 3.0 $ 2.4 X $ 1.9 $ 1.5 $ 51.3 X $ $ $ $ $ $ 2.3 $ 1.8 $ 1.5 $ 1.2 $ 0.9 $ 0.8 $ 0.6 X $ 0.5 X $ 0.4 X $ 0.3 X $ $ 10.3 % $ 0.9 $ 0.7 $ 0.6 0.6$ 0.5 $ 0.4 $ 0.3 $ 0.2 X $ 0.2 X $ 0.1 X $ 0.1 X $ 4.0 X $ $ 0.8 $ 0.5 $ 0.4 $ 0.3 $ 0.2 $ X $ $ $ $ 0.1 X $ 0.1 $ 0.1 $ 0.0 X $ 0.0 X $ 2.5 % c. What would be the present value of the tax shield if the government allowed Sudbury to write-off the factory immediately? (Enter your answer in millions rounded to 1 decimal place.) Answer is complete but not entirely correct. Percent value of depreciation tax shields $ 4.1

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