Question: XYZ Inc. is considering a project that will require the purchase of $875,000 of equipment. The equipment will be depreciated straight-line to a $35,000 book

XYZ Inc. is considering a project that will require the purchase of $875,000 of equipment. The equipment will be depreciated straight-line to a $35,000 book value over the seven-year life of the project after which it will be worthless. The required return is 13 percent and the tax rate is 34 percent. What is the value of the depreciation tax shield in year 4 of the project?

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