Suppose that the government allows companies to use double-declining-balance depreciation with the option to switch at...

 

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Suppose that the government allows companies to use double-declining-balance depreciation with the option to switch at any point to straight-line. Now what is the present value of the depreciation tax shields? (Enter your answers in millions rounded to 1 decimal place.) Double decline Schedule Start of Year Book Value Depreciation Tax Shields at 35% Tc PV (Tax Shields) at 12% Year 1 $10.4 $ 2.1 $ 0.7 0.7 $ Year 2 $8.3 $ 1.7 $ 0.6 $ 0.5 Year 3 $ 6.7 $ 1.3 $ 0.5 $ 0.3 > Answer is complete but not entirely correct. Year Year Year 5 $ 4.3 Year 8 7 9 $ 2.0 $ 1.4 $0.9 $ 0.7 $ 0.7 0.2 $ 0.3 $ 0.2 ✓ $ $ $ 0.2 S 0.1 0.1 Year 4 $ 5.3 $ 1.1 $ 0.4 $ 0.2 Year 6 $ 3.4 $ 0.7 $ 0.2 $ 0.1 $ 2.7 $ 0.7 $ $ 0.2 0.1 Year 10 $ 0.7 $ 0.7 $ 0.2 $ 0.1 Total $ 10.8 x $ 9.1 x $3.6 1.9 x S Suppose that the government allows companies to use double-declining-balance depreciation with the option to switch at any point to straight-line. Now what is the present value of the depreciation tax shields? (Enter your answers in millions rounded to 1 decimal place.) Double decline Schedule Start of Year Book Value Depreciation Tax Shields at 35% Tc PV (Tax Shields) at 12% Year 1 $10.4 $ 2.1 $ 0.7 0.7 $ Year 2 $8.3 $ 1.7 $ 0.6 $ 0.5 Year 3 $ 6.7 $ 1.3 $ 0.5 $ 0.3 > Answer is complete but not entirely correct. Year Year Year 5 $ 4.3 Year 8 7 9 $ 2.0 $ 1.4 $0.9 $ 0.7 $ 0.7 0.2 $ 0.3 $ 0.2 ✓ $ $ $ 0.2 S 0.1 0.1 Year 4 $ 5.3 $ 1.1 $ 0.4 $ 0.2 Year 6 $ 3.4 $ 0.7 $ 0.2 $ 0.1 $ 2.7 $ 0.7 $ $ 0.2 0.1 Year 10 $ 0.7 $ 0.7 $ 0.2 $ 0.1 Total $ 10.8 x $ 9.1 x $3.6 1.9 x S

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To calculate the present value of the depreciation tax shields we need to discount each years tax sh... View the full answer