Jabba-Dabba-Doo Inc. renovated its warehouses exactly two years ago at a cost of $3.5 million. The renovations were considered leasehold improvements, so the cost was subject to straight-line depreciation for tax purposes. The firm will not need to renovate the warehouses for another three years (from today). Given that the firm’s marginal tax rate is 35% and required return is 12%, what is the present value of the remaining depreciation tax shields on the leasehold improvement? Ignore the half-year rule, and round your answer to the nearest dollar. Select one: a. $588,449 b. $359,629 c. $513,181 d. $630,069 e. $210,303

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
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Jabba-Dabba-Doo Inc. renovated its warehouses exactly two years ago at a cost of $3.5 million. The renovations were considered leasehold improvements, so the cost was subject to straight-line depreciation for tax purposes. The firm will not need to renovate the warehouses for another three years (from today). Given that the firm’s marginal tax rate is 35% and required return is 12%, what is the present value of the remaining depreciation tax shields on the leasehold improvement? Ignore the half-year rule, and round your answer to the nearest dollar.

Select one:
a. $588,449
b. $359,629
c. $513,181
d. $630,069
e. $210,303
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