1. Your Company is considering a new project that will require $740,000 of new equipment at the start of the project. The equipment will have a depreciable life of 6 years and will be depreciated to a book value of $128,000 using straight-line depreciation. The cost of capital is 11%, and the firm's tax rate is 30%. Estimate the present value of the tax benefits from depreciation.
2. Your Company is considering a new project that will require $680,000 of new equipment at the start of the project. The equipment will have a depreciable life of 8 years and will be depreciated to a book value of $216,000 using straight-line depreciation. The cost of capital is 12%, and the firm's tax rate is 34%. Estimate the present value of the tax benefits from depreciation.
3. Your Company is considering a new project that will require $990,000 of new equipment at the start of the project. The equipment will have a depreciable life of 9 years and will be depreciated to a book value of $301,500 using straight-line depreciation. The cost of capital is 14%, and the firm's tax rate is 34%. Estimate the present value of the tax benefits from depreciation (closest to).