Please need help with this accounting question A project will increase sales by $300,000and cash expenses by $55,000. The projectwill cost $500,000 and be depreciated usingthe straight-line method to a zero bookvalue over the 5-year life of the project. Thecompany has a marginal tax rate of 40%.What is the yearly value of the depreciationtax shield?

Step 1: Define Tax ShieldA tax shield is a reduction obtained from the taxable income because of…

Answered: A project will increase sales by…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 13P

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A project will increase sales by $250,000 and cash expenses by $60,000. The project will cost $400,000 and be depreciated using the straight-line method to a zero book value over the 4-year life of the project. The company has a marginal tax rate of 35%. What is the yearly value of the depreciation tax shield? Answer
What is the yearly value of the depreciation tax shield?
A project will increase sales by $250,000 and cash expenses by $60,000. The project will cost $400,000 and be depreciated using the straight-line method to a zero book value over the 4-year life of the project. The company has a marginal tax rate of 35%. What is the yearly value of the depreciation tax shield?
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