Your company is considering a new project that will require $767,000 million of new equipment at the start of the project. The equipment will have a depreciable life of 8 years and will be depreciated to a book value of $143,000 using straight-line depreciation. Neither bonus depreciation nor Section 179 expensing will be used. The cost of capital is 11 percent, and the firm's tax rate is 21 percent. Estimate the present value of the tax benefits from depreciation. Note: Round your answer to 2 decimal places. Answer is complete but not entirely correct. Present value $ 120,419.27X

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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Your company is considering a new project that will require $767,000 million of new equipment at the start of the project. The
equipment will have a depreciable life of 8 years and will be depreciated to a book value of $143,000 using straight-line depreciation.
Neither bonus depreciation nor Section 179 expensing will be used. The cost of capital is 11 percent, and the firm's tax rate is 21
percent.
Estimate the present value of the tax benefits from depreciation.
Note: Round your answer to 2 decimal places.
> Answer is complete but not entirely correct.
Present value $ 120,419.27
Transcribed Image Text:Your company is considering a new project that will require $767,000 million of new equipment at the start of the project. The equipment will have a depreciable life of 8 years and will be depreciated to a book value of $143,000 using straight-line depreciation. Neither bonus depreciation nor Section 179 expensing will be used. The cost of capital is 11 percent, and the firm's tax rate is 21 percent. Estimate the present value of the tax benefits from depreciation. Note: Round your answer to 2 decimal places. > Answer is complete but not entirely correct. Present value $ 120,419.27
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