A firm invests $10 million in a new stamping machine.

Description

A firm invests $10 million in a new stamping machine.

A firm invests $10 million in a new stamping machine. It depreciates it straight line for tax purposes over 5 years. The tax rate is 30%, inflation is 4% a year, and the discount rate is 8%. What is the PV of the depreciation tax shield?

Multiple Choice

• $600,000.
• $2,395,626.
• $2,579,497.
• $3,000,000.

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A firm invests $10 million in a new stamping machine.

A firm invests $10 million in a new stamping machine.