Your firm needs a machine which costs $260,000, and requires $47,000 in maintenance for each year of its 10 year life. after 5 years, this machine will be replaced. the machine falls into the macrs 10-year class life category. assume a tax rate of 40% and a discount rate of 14%. what is the depreciation tax shield for this project in year 10?

nominal tax shield in year 10: 6,812 dollars

present value of the tax shield: 1,837.49

Explanation:

the nominal tax shield in year 10:

We look into the MACRS table for 10-years property class: 6.55%

The depreciation expense for this year is 260,000 x 6.55% = 17,030

Then this produces a tax shield of 40% 6,812

The nominal tax shield at year 10 is 6,812 dollars

considering time value of money today this tax shield is worth:

PV: 1,837.49

answer; (c) run the name by everyone you can;