**Markov Manufacturing Depreciation Analysis****Scenario:**Markov Manufacturing recently spent $15 million to purchase some equipment used in the manufacture of disk drives. The firm expects that this equipment will have a useful life of five years, and its corporate tax rate is 20%. The company plans to use straight-line depreciation.**Questions and Steps:**### a. What is the annual depreciation expense associated with this equipment?**Question:**What is the annual depreciation expense?**Answer:**The annual depreciation expense is **$______ million**. (Round to three decimal places.)### b. What is the annual depreciation tax shield?**Question:**What is the annual depreciation tax shield?**Answer:**The annual depreciation tax shield is **$______ million**. (Round to three decimal places.)### c. Rather than straight-line depreciation, suppose Markov will use the MACRS depreciation method for five-year property. Calculate the depreciation tax shield each year for this equipment under this accelerated depreciation schedule.**Depreciation Tax Shield Calculations:**- **Year 0**: The depreciation tax shield year 0 is **$______ million**. (Round to three decimal places.)- **Year 1**: The depreciation tax shield year 1 is **$______ million**. (Round to three decimal places.)- **Year 2**: The depreciation tax shield year 2 is **$______ million**. (Round to three decimal places.)- **Year 3**: The depreciation tax shield year 3 is **$______ million**. (Round to three decimal places.)- **Year 4**: The depreciation tax shield year 4 is **$______ million**. (Round to three decimal places.)- **Year 5**: The depreciation tax shield year 5 is **$______ million**. (Round to three decimal places.)### d. If Markov has a choice between straight-line and MACRS depreciation schedules, and its marginal corporate tax rate is expected to remain constant, which should it choose? Why?**Question:**If the marginal corporate tax rate remains constant, should Markov choose straight-line or MACRS depreciation?**Choices:**- A. With MACRS, the firm receives the depreciation tax shields sooner. Thus, MACRS depreciation leads to a higher NPV of Markov’s FCF.- B. With either method, the total depreciation tax shield is the same. Therefore,

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Markov Manufacturing recently spent $15 million to purchase some equipment used in the manufacture of disk drives. The firm expects that this equipment will have a useful life of five years, and its corporate tax rate is 20%. The company plans to use straight-line depreciation. a. What is the annual depreciation expense associated with this equipment? b. What is the annual depreciation tax shield? c. Rather than straight-line depreciation, suppose Markov will use the MACRS depreciation method for five-year property. Calculate the depreciation tax shield each year for this equipment under this accelerated depreciation schedule. d. If Markov has a choice between straight-line and MACRS depreciation schedules, and its marginal corporate tax rate is expected to remain constant, which should it choose? Why? e. How might your answer to part (d) change if Markov anticipates that its marginal corporate tax rate will change substantially over the next five years? a. What is the annual depreciation expense associated with this equipment? The annual depreciation expense is $ million. (Round to three decimal places.) b. What is the annual depreciation tax shield? The annual depreciation tax shield is $ million. (Round to three decimal places.) c. Rather than straight-line depreciation, suppose Markov will use the MACRS depreciation method for five-year property. Calculate the depreciation tax shield each year for this equipment under this accelerated depreciation schedule. The depreciation tax shield year 0 is S million. (Round to three decimal places.) The depreciation tax shield year 1 is $ million. (Round to three decimal places.) The depreciation tax shield year 2 is $ The depreciation tax shield year 3 is S The depreciation tax shield year 4 is $ The depreciation tax shield year 5 is $ million. (Round to three decimal places.) million. (Round to three decimal places.) million. (Round to three decimal places.) million. (Round to three decimal places.) debt Fo JHACO -