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What is the depreciation tax shield in the second year

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Reference no: EM133002015

Problem 1: Tinney & Smyth Inc. is considering the purchase of a new batch polymer-bonding machine for producing Crazy Rubber, a new children's toy. The machine will increase EBITDA by $215,000 per year for the next two years. The machine's purchase price is $260,000 and the salvage value at the end of two years is $46,800. The machine is classified as 3-year property with MACRS depreciation rates for the first two years of 33.33% and 44.45%. What is the depreciation tax shield in the second year of operations? Use a tax rate of 35%. Round to the nearest dollar.

Reference no: EM133002015

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