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Value of the depreciation tax shield in year 2 of project

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Leisure Vacations is considering a project which will require the purchase of $1.4 million in new 5-Year MACRS (The Modified Accelerated Cost Recovery System) equipment. The MACRS depreciation rates are 20 percent, 32 percent, 19.2 percent, 11.52 percent, 11.52 percent, and 5.76 percent for Years 1 to 6, respectively. The firm desires a minimal 14 percent rate of return and the tax rate is 34 percent. What is the value of the depreciation tax shield in Year 2 of the project?

Reference no: EM132615797

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