Calculate the depreciation tax shield

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Your firm needs a computerized machine tool lathe which costs $42,000 and requires $11,200 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 39 percent and a discount rate of 12 percent.

Calculate the depreciation tax shield for this project in year 3.

Reference no: EM131155889

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