+1-415-670-9189
info@expertsmind.com
What is the value of the depreciation tax shield
Course:- Financial Management
Reference No.:- EM13923860




Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Financial Management

You are contemplating the purchase of a new $1,840,000 computer-based dairy cow feeding system. The system will be depreciated straight-line over its ten year life and have no value at the end of its life. you will earn $530,000 before taxes per year from additional milk production. If the tax rate is 25% and the required return to capitol is 10% compute the following-on an after-tax basis.

a) What is the annual after-tax cash flow?

b) What is the value of the depreciation tax shield?

c) Compute the Net Present Value.

d) How much would you be willing to pay at most for this feeding system?




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
The city of Carlsbad in California is considering building a $300 million water-desalination plant. The facility would be the largest in the Western Hemisphere, producing 50 m
Ferd Rumpledink at UBS now observes the data below for the USD and the CHF. He still has 10,000,000 USD or the CHF equivalent (at the current spot rate) to invest for 180 days
Suppose that you are a financial manager of a manufacturing company. Would you raise or lower the cash balance of your company if interest rates are rising in the financial ma
The value of an otherwise identical call option is higher if the strike price the holder must pay to buy the stock is higher. Because a put is the right to sell the stock, put
Write a case study of a firm that has issued convertible securities (preferred or bond). Discuss why the firm issued the convertible securities. Discuss problems that firm had
Consider a firm with year 0 free cash flows (FCF) of $200 million. Assume that these free cash flows are a growing perpetuity, growing at a constant growth rate of 3% per year
What is the market value of a zero coupon bond with 5 years to maturity? The bond was originally sold with a yield to maturity equal to 11 percent, but the market rate today i
Required rate of return Assume that the risk-free rate is 5.5% and the expected return on the market is 8%. What is the required rate of return on a stock with a beta of 0.7?