Problem:
Your firm needs a machine which costs $230,000, and requires $38,000 in maintenance for each year of its 5 year life. After 3 years, this machine will be replaced. The machine falls into the MACRS 5-year class life category. Assume a tax rate of 30% and a discount rate of 13%.
Required:
Question: What is the depreciation tax shield for this project in year 5?
- $30,912
- $44,160
- $5,740.80
- $ 13,248.00
Note: Please explain comprehensively and give step by step solution.