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What is the present value of the tax savings

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Reference no: EM132954387

Question - You are working for a Hospital system which just completed a new facility on January 1st, 2020. This new facility cost $10,000,000 and the land on which you built it costs $5,000,000 (for a total of 15 million dollars). The facility is expected be useful for 10 years with a salvage value of $2,000,000.

a. If you use a straight line depreciation, what is the annual depreciation expense on this new facility?

b. Assuming that the tax rate is 30%, how much did you save in taxes in the first year?

c. Assuming that the cost of capital (i.e., the interest rate) is 10%, what is the present value of the tax savings for the entire 10 years?

Reference no: EM132954387

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