What tax rate would be needed in order for the pv

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A company purchases an asset that costs $11,000. This asset qualifies as three-year property under MACRS. The company uses an after-tax discount rate of 13% and faces a 39% income tax rate.

Problem 1. Demonstrate that the PV of the depreciation deductions, when the income tax rate is 39%, is $3,394.

Problem 2. Given an after-tax discount rate of 13%, what tax rate would be needed in order for the PV of the depreciation deductions to equal $4,290?

Reference no: EM133000810

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