Salvage Co. is considering the purchase of a new ocean-going vessel that could potentially reduce labor costs of its operation by a considerable margin. The new ship would cost P500,000 and would be fully depreciated by the straight-line method over 10 years. At the end of 10 years, the ship will have no value and will be sunk in some already polluted harbor. The Salvage Co's cost of capital is 12 percent, and its marginal tax rate is 40 percent. The ship produces equal annual labor cost savings over its 10-year life. What is the present value of the depreciation tax benefit of the new ship? (Round to the nearest peso.) P200,000 P169,506 P282,510 P113,004
Salvage Co. is considering the purchase of a new ocean-going vessel that could potentially reduce labor costs of its operation by a considerable margin. The new ship would cost P500,000 and would be fully depreciated by the straight-line method over 10 years. At the end of 10 years, the ship will have no value and will be sunk in some already polluted harbor. The Salvage Co's cost of capital is 12 percent, and its marginal tax rate is 40 percent. The ship produces equal annual labor cost savings over its 10-year life. What is the present value of the depreciation tax benefit of the new ship? (Round to the nearest peso.) P200,000 P169,506 P282,510 P113,004
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 17P: The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will...
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