In: Finance
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?
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.