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Your company is considering a new project that will require $10,000 of new equipment at the...

Your company is considering a new project that will require $10,000 of new equipment at the start of the project. The equipment will have a depreciable life of five years and will be depreciated to a book value of $3,000 using straight-line depreciation. The cost of capital is 9 percent, and the firm's tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation. SHOW YOUR WORK

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Expert Solution

Solution :

The present value of the tax benefits from depreciation = $ 1,851.47

= $ 1,851 ( when rounded off to the nearest whole number )

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

jeff jeffy answered 5 months ago
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