Problem:
Your Company is considering a new project that will require $250,000 of new equipment at the start of the project. The equipment will have a depreciable life of 8 years and will be depreciated to a book value of $10,000 using straight-line depreciation. The cost of capital is 12%, and the firm's tax rate is 34%.
Required:
Question: Estimate the present value of the tax benefits from depreciation.
Note: Show supporting computations in good form.