Suppose that Sudbury Mechanical Drifters is proposing to invest $80 million in a new factory. It can depreciate this investment straight-line over 8 years. The tax rate is 21%, and the discount rate is 12%. What is (approximately) the present value of Sudbury's depreciation tax shields?
Suppose that Sudbury Mechanical Drifters is proposing to invest $80 million in a new factory. It can depreciate this investment straight-line over 8 years. The tax rate is 21%, and the discount rate is 12%. What is (approximately) the present value of Sudbury's depreciation tax shields?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Suppose that Sudbury Mechanical Drifters is proposing to invest $80 million in a new factory. It can
depreciate this investment straight-line over
8 years. The tax rate is 21%, and the discount rate is 12%.
What is (approximately) the present value of Sudbury's depreciation tax shields?
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