Your company is considering a new project that will require $825,000 million of new equipment at the start of the project. The equipment will have a depreciable life of 9 years and will be depreciated to a book value of $141,000 using straight-line depreciation. Neither bonus depreciation nor Section 179 expensing will be used. The cost of capital is 12 percent, and the firm's tax rate is 21 percent. Estimate the present value of the tax benefits from depreciation. (Round your answer to 2 decimal places.)

Your company is considering a new project that will require $825,000 million of new equipment at the start of the project. The equipment will have a depreciable life of 9 years and will be depreciated to a book value of $141,000 using straight-line depreciation. Neither bonus depreciation nor Section 179 expensing will be used. The cost of capital is 12 percent, and the firm's tax rate is 21 percent. Estimate the present value of the tax benefits from depreciation. (Round your answer to 2 decimal places.)

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

Section: Chapter Questions

Problem 1PS

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