What is the present value of depreciation tax shield

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1. ABC Products needs to replace its rawhide tanning and molding equipment. It can be used for five years and will have no salvage value. The equipment costs $930,000. The firm can lease it for $245,000 a year, or it can borrow the money to purchase the equipment at 6%. The firm's tax rate is 34%. The CCA rate is 20% (Class . What is the present value of the depreciation tax shield?

a. $277,177 b. $258,913 c. $236,959 d. $186,000 e. $120,888

2. Pangbourne Whitchurch has preferred stock outstanding. The stock pays a dividend of $8 per share, and sells for $50. The corporate tax rate is 35%. What is the percentage cost of the preferred stock? (Enter your answer as a whole percent.)

Reference no: EM132020386

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