Your firm needs a computerized machine tool lathe which costs $60,000 and requires $13,000 in maintenance for each year of its 3- year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category, and neither bonus depreciation nor Section 179 expensing can be used. Assume a tax rate of 21 percent and a discount rate of 11 percent. Calculate the depreciation tax shield for this project in year 3. (Round your answer to 2 decimal places.) Depreciation tax shield

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter9: Capital Budgeting And Cash Flow Analysis
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Your firm needs a computerized machine tool lathe which costs $60,000 and requires $13,000 in maintenance for each year of its 3-
year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category, and neither
bonus depreciation nor Section 179 expensing can be used. Assume a tax rate of 21 percent and a discount rate of 11 percent.
Calculate the depreciation tax shield for this project in year 3. (Round your answer to 2 decimal places.)
Depreciation tax shield
Transcribed Image Text:Your firm needs a computerized machine tool lathe which costs $60,000 and requires $13,000 in maintenance for each year of its 3- year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category, and neither bonus depreciation nor Section 179 expensing can be used. Assume a tax rate of 21 percent and a discount rate of 11 percent. Calculate the depreciation tax shield for this project in year 3. (Round your answer to 2 decimal places.) Depreciation tax shield
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