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Suppose that Sudbury Mechanical Drifters is proposing to invest $20 million in a new factory. It can depreciate this investment straight-line over 10 years. The

Suppose that Sudbury Mechanical Drifters is proposing to invest $20 million in a new factory. It can depreciate this investment straight-line over 10 years. The tax rate is 21%, and the discount rate is 8%.

Question: What is the present value of the depreciation tax shield?

Multiple Choice

a. 2.8

b. 2.1

c. 1.4

d. 1.6

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