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The Question
A firm plans to purchase a $50,000 asset that will be depreciated straight-line over a 5-year life to a zero salvage value. What is the present value of the resulting depreciation tax shield if the tax rate is 35% and the discount rate is 10%?
Year 1
Depreciation
Tax rate
Tax shield 10000
35%
3500 PV of tax shiel $13,267.75 Year 2
Year 3
Year 4
Year 5
10000
10000
10000
10000
35%
35%
35%
35%
3500
3500
3500
3500
Solution details
Solution #00070331
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STATUSAnswered
QUALITYApproved
DATE ANSWEREDOct 14, 2020
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