Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 8, Problem 17P

a.

Summary Introduction

To determine: The present value of the depreciation tax shield, and the straight-line over a 10-year period.

Introduction:

Depreciation is an arranged, progressive lessening in the recorded estimation of an asset over its valuable life by charging it to cost. Depreciation is connected to fixed asset, which by and large experiences a misfortune in its utility over various years.

b.

Summary Introduction

To determine: The present value of the depreciation tax shield, the straight-line over a 10-year period.

c.

Summary Introduction

To determine: The present value of the depreciation tax shield, using five year MACRS depreciation schedule.

d.

Summary Introduction

To choose: The present value of the depreciation tax shield immediate deduction.

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Your firm is considering a project that would require purchasing $7.5 million worth of new equipment. Determine the present value of the depreciation tax shield associated with this equipment if the firm's tax rate is 40%, the appropriate cost of capital is 8%, and the equipment can be depreciated Straight- line over a five-year period, with the first deduction starting in one year. Please express the answer in the unit of million and up to 2 places of decimal.
Your company is considering a new project that will require $100,000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $5,000 using straight-line depreciation. The cost of capital is 14 percent, and the firm's tax rate is 30 percent. Estimate the present value of the tax benefits from depreciation.
your company is considering a new project that will require $250,000 of new equipment at the start of the project. The equipment will have a depreciable life of eight years and will be depreciated to a book value of $10,000 using straight-line depreciation. The cost of capital is 12 percent, and the firm's tax rate is 21 percent. Estimate the present value of the tax benefits from depreciation. Multiple Choice ___ $117,733 ___ $86,997 ___ $31,296 ___ $63,618
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