Your Firm is considering a project that would require purchasing 7.2 million worth of new equipment....

Your Firm is considering a project that would require purchasing 7.2 million worth of new equipment. Determine the present value of the depreciation tax shield associated with this equipment if the firm’s tax rate is 35%, the total appropriate cost of capital is 10%, and the equipment can be depreciated.

A. Straight line over a ten year period, with the first deduction starting in one year. The present value of the depreciatipn tax shield associated with the equipment is $ __________ million. (Round the final answer to three decimal places. Round all intermediate values to four decimal places as needed).

B. Straight line over a five year period, with the first deduction starting in one year. The pesent value of the depreciation tax shield associated with this equipment is $_____________ million. ( Round the final answer to three decimal places. Round all intermediate values to four decimal places as needed)

C. Using MACRS depreciation with a five year recovery period and starting immediately. The present value of the depreciation tax shield associated with this equipment is $_____________ million. (Round the final answer to three decimal places. Round all intermediate values to four decimal places as needed.)

D. Fully as an immediate deduction. The present value of the depreciation tax shield is $____________ million (Round the final answer to three decimal places. Round all intermediate values to four decimal places as needed)

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