Consider an asset that is being evaluated in a leasing versus purchase decision. The asset is costs $100,000 and is considered a 3-year MACRS asset. If the discount rate is 10%, the present value of depreciation tax shields is closest to:

Question

Quizplus · Accepted Answer

The present value of depreciation tax shields is calculated by applying the MACRS depreciation rates to the asset's cost, multiplying by the tax rate, and discounting at the given rate. The MACRS rates for a 3-year asset are 33.33%, 44.45%, 14.81%, and 7.41%. Assuming a tax rate of 30%, the present value of the tax shields is closest to $33,289.

Consider an Asset That Is Being Evaluated in a Leasing