Suppose that Sudbury Mechanical Drifters is proposing to invest $10.9 million in a new factory. It...

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Finance

Suppose that Sudbury Mechanical Drifters is proposing to invest$10.9 million in a new factory. It can depreciate this investmentstraight-line over 10 years. The tax rate is 40%, and the discountrate is 12%
a. What is the present value of Sudbury’s depreciation taxshields? (Enter your answers in millions rounded to 1 decimalplace.)
straight line schedule year1 year2 year3 year4 year5 year6 year7 year8 year9 year10 Total
straight line 10 year
tax shields at 40%Tc
PV (Tax Shields) at 12 %
b. Suppose that the government allows companies to usedouble-declining-balance depreciation with the option to switch atany point to straight-line. Now what is the present value of thedepreciation tax shields?
double decline schedule year1 year2 year3 year4 year5 year6 year7 year8 year9 year10 total
Start of year Book Value
Depreciation
Tax Shields at 40% Tc
PV (tax shields) at 12%
c. What would be the present value of the taxshield if the government allowed Sudbury to write-off the factoryimmediately? (Enter your answer in millions rounded to 1decimal place.)
percent value of depreciation tax shields

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Suppose that Sudbury Mechanical Drifters is proposing to invest$10.9 million in a new factory. It can depreciate this investmentstraight-line over 10 years. The tax rate is 40%, and the discountrate is 12%a. What is the present value of Sudbury’s depreciation taxshields? (Enter your answers in millions rounded to 1 decimalplace.)straight line schedule year1year2year3year4year5year6year7year8year9year10Totalstraight line 10 yeartax shields at 40%TcPV (Tax Shields) at 12 %b. Suppose that the government allows companies to usedouble-declining-balance depreciation with the option to switch atany point to straight-line. Now what is the present value of thedepreciation tax shields?double decline scheduleyear1year2year3year4year5year6year7year8year9year10totalStart of year Book ValueDepreciationTax Shields at 40% TcPV (tax shields) at 12%c. What would be the present value of the taxshield if the government allowed Sudbury to write-off the factoryimmediately? (Enter your answer in millions rounded to 1decimal place.)percent value of depreciation tax shields

straight line schedule	year1	year2	year3	year4	year5	year6	year7	year8	year9	year10	Total
straight line 10 year
tax shields at 40%Tc
PV (Tax Shields) at 12 %

double decline schedule	year1	year2	year3	year4	year5	year6	year7	year8	year9	year10	total
Start of year Book Value
Depreciation
Tax Shields at 40% Tc
PV (tax shields) at 12%