A machine costs 100,000 and is subject to a depreciation rate of 25 percent under the WDV method. What is the present value of the tax savings on account of depreciation for a period of 5 years if the tax rate is 40 percent and the discount rate is 15 percent?

A machine costs 100,000 and is subject to a depreciation rate of 25 percent under the WDV method. What is the present value of the tax savings on account of depreciation for a period of 5 years if the tax rate is 40 percent and the discount rate is 15 percent?

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Description: A machine costs 7100,000 and is subject to a depreciation rate of 25 percent underthe WDV method. What is the present value of the tax savings on account ofdepreciation for a period of 5 years if the tax rate is 40 percent and the discount rateis 15

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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6
If the depreciation tax shield is 40,000 due to tax rate declaration of 20%, what is the price of the machine if it has an expected life of 20 years and the money is worth 13% compounded annually? 1. Depreciation: (4 decimal places only) 2. Price: (3 decimal places)

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