Your company is considering a new project that will require $790,000 of new equipment at the start of the project. The equipment will have a depreciable life of 5 years and will be depreciated to a book value of $255,000 using straight-line depreciation. The cost of capital is 12%, and the firm's tax rate is 21%. Estimate the present value of the tax benefits from depreciation. Multiple Choice $84,530 $22,470 $107,000
Your company is considering a new project that will require $790,000 of new equipment at the start of the project. The equipment will have a depreciable life of 5 years and will be depreciated to a book value of $255,000 using straight-line depreciation. The cost of capital is 12%, and the firm's tax rate is 21%. Estimate the present value of the tax benefits from depreciation. Multiple Choice $84,530 $22,470 $107,000
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 18E
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Question
![Your company is considering a new project that will require $790,000 of new equipment at the start of the project. The equipment will have a
depreciable life of 5 years and will be depreciated to a book value of $255,000 using straight-line depreciation. The cost of capital is 12%, and the firm's
tax rate is 21%. Estimate the present value of the tax benefits from depreciation.
Multiple Choice
O
$84,530
$22,470
$107,000
$80,999](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F631dbc6d-5610-453b-a9a4-1f2fc26381fa%2F3a96b0be-0541-4885-8a6b-5bddd0c41fd9%2Fkg54nog_processed.png&w=3840&q=75)
Transcribed Image Text:Your company is considering a new project that will require $790,000 of new equipment at the start of the project. The equipment will have a
depreciable life of 5 years and will be depreciated to a book value of $255,000 using straight-line depreciation. The cost of capital is 12%, and the firm's
tax rate is 21%. Estimate the present value of the tax benefits from depreciation.
Multiple Choice
O
$84,530
$22,470
$107,000
$80,999
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