Calculate depreciation tax shield in year four of project

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Reference no: EM131575498

Big Ben Inc. is considering a project that will require the purchase of $875,000 in new equipment. The equipment will be depreciated straight-line to a zero book value over the 7-year life of the project. The equipment can be scraped at the end of the project for 5% of its original cost. Annual sales from this project are estimated at $420,000. Net working capital equals 20% of sales to support the project. All of the net working capital will be recouped. The required rate of return is 16% and the tax rate is 34%. Calculate the depreciation tax shield in year 4 of the project. (Round to a whole number)

Reference no: EM131575498

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