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Author Question: Droids-R-Us Inc. (DRU), is considering the installation of a new production line to make service ... (Read 379 times)

elizabeth18

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Droids-R-Us Inc. (DRU), is considering the installation of a new production line to make service mechanoids. The cost of the new manufacturing equipment is $2.2 million. The machines are classified as 7-year properties. (MACRS rates are provided in the table, below.) The machines will be purchased at the beginning of 2014. (DRU uses a mid-year placed-in-service convention.) 

DRU's engineers estimate that the new assembly line could be ready for operations in early 2014. Annual EBITDA is forecasted to be $1.3M for 2014 and all subsequent years of the project. DRU's marginal tax rate is 35%. 

What is the value of the depreciation tax shield in 2015? (Do NOT assume that the equipment is salvaged in 2015.) Round your answers to the nearest dollar.

Year5-Year7-Year10-Year
120.00%14.29%10.00%
232.00%24.49%18.00%
319.20%17.49%14.40%
411.52%12.49%11.52%
511.52%8.93%9.22%

◦ $110,033
◦ $188,573
◦ $134,673
◦ $314,380
◦ $538,780


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Marked as best answer by elizabeth18 on Apr 25, 2021

jackie

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elizabeth18

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Reply 2 on: Apr 25, 2021
Excellent


raenoj

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

 

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