Question: Your company is considering a new project that will require $1 million of new equipment at the start of the project. The equipment will have

Your company is considering a new project that will require $1 million of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $150,000 using straight-line depreciation. The cost of capital is 13 percent, and the firm’s tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation.

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