Problem:
Your firm needs a machine which costs $500,000, and requires $10,000 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%.
Required:
Question: What is the depreciation tax shield for this project in year 3?
Note: Explain in detail and show all computations in proper way.