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Forsythe's Fancies has installed new, high-efficiency ovens into its kitchens. The machines cost $50,000 and are...

Forsythe's Fancies has installed new, high-efficiency ovens into its kitchens. The machines cost $50,000 and are good for 5 years. It is expected to be fully depreciated at the end of its useful life, at which time we will sell them for $5,000 per unit. The company has a cost of capital of 12% and taxes of 35%.

a). Determine the depreciation schedule for the ovens using both straight-line and the MACRS table.

b). What is the PV of the tax shields for the 5 years we own the ovens?

c). Assume we sold the machines after 2 years because we found another upgrade. What would be the PV of the tax shields under both depreciation schedules?

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ekkarill92 answered 2 years ago
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