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Your company is considering a project that would require purchasing7.9 million worth of new equipment. Determine the present value ofthe depreciation tax shield associated with this equipment if thefirm’s rate is 38%, the appropriate cost of capital is 9%, and theequipment can be depreciated.

A. Straight line over a ten year period with the firstdeduction starting in the new year. The present value of thedepreciation tax shield associated with this equipment is $ million(Round the final answer to three decimal places. Round allintermediate values to four decimal places as needed)

B. Straight line ove a five year period, with the firstdeduction starting in one year. The present value of thedepreciation taxshield associated with the equipment is $ million.(Round the final answer to three decimal places. (Round allintermediate values to four decimal places as needed)

C. Using MACRS depreciation with a five year recovery periodand starting immediately. The present value of the depreciation taxshield associated with the equipment is $ million. (Round the finalanswer to three decimal places. Round all intermediate values tofourdecimal places as needed)

D. Fully as an immediate deduction. The present value of thedepreciation tax shield is $ million (Round the final answer tothree decimal places. Round all intermediate values to four decimalplaces as needed)