1. Your firm needs a machine which costs $280,000, and requires $49,000 in maintenance for each year of its 7 year life. After 5 years, this machine will be replaced. The machine falls into the MACRS 7-year class life category. Assume a tax rate of 30% and a discount rate of 16%. What is the depreciation tax shield for this project in year 7?
$17,502.80
$25,004
$7,501.20
$4,000.64
2. Your Company is considering a new project that will require $1,070,000 of new equipment at the start of the project. The equipment will have a depreciable life of 9 years and will be depreciated to a book value of $309,500 using straight-line depreciation. The cost of capital is 12%, and the firm's tax rate is 40%. Estimate the present value of the tax benefits from depreciation (closest to).
$84,500
$50,700
$33,800
$180,095
3. Your firm needs a machine which costs $160,000, and requires $31,000 in maintenance for each year of its 3 year life. After 3 years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 35% and a discount rate of 15%. What is the depreciation tax shield for this project in year 3?
$15,402
$3,554.40
$23,696
$8,293.60