Your firm needs a machine which costs $140,000, and requires $35,000 in maintenance for each year...

Your firm needs a machine which costs $140,000, and requires $35,000 in maintenance for each year of its 10 year life. After 5 years, this machine will be replaced. The machine falls into the MACRS 10-year class life category. Assume a tax rate of 40% and a discount rate of 13%. What is the depreciation tax shield for this project in year 10?

Expert Solution

If life of project is 5 year then Depreciation tax shield is calculated in excel and screen shot provided below:

If life of project is 5 year then Depreciation tax shield is $25,197.65.

Again,

If life of project is 10 year then Depreciation tax shield is calculated in excel and screen shot provided below:

If life of project is 10 year then Depreciation tax shield is $32,422.33.

jeff jeffy answered 2 years ago

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