What is the annual depreciation tax? shield

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Reference no: EM131558566

Markov Manufacturing recently spent $11.4 million to purchase some equipment used in the manufacture of disk drives. The firm expects that this equipment will have a useful life of five? years, and its marginal corporate tax rate is 35%. The company plans to use? straight-line depreciation. a. What is the annual depreciation expense associated with this? equipment? b. What is the annual depreciation tax? shield? c. Rather than? straight-line depreciation, suppose Markov will use the MACRS depreciation method for the? five-year life of the property. Calculate the depreciation tax shield each year for this equipment under this accelerated depreciation schedule. d. If Markov has a choice between? straight-line and MACRS depreciation? schedules, and its marginal corporate tax rate is expected to remain? constant, which schedule should it? choose? Why? e. How might your answer to part ?(d?) change if Markov anticipates that its marginal corporate tax rate will increase substantially over the next five? years?

Reference no: EM131558566

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