Question: 1. What is the present value of the depreciation tax shield resulting from depreciating a $150,000 capital expenditure over three years if the tax rate is 15% and the opportunity cost of capital 10%?
2. You have just sold an asset for $500,000. Five years ago, you bought the asset for $600,000 and since have been depreciating the asset in a straight line over 20 years. What are the after-tax proceeds of the sale if your tax rate is 10%?