Arnold is acquiring a new machine with a life of 5 years for use on its production line. The following data relate to this purchase: Cost of new machine$100000Annual cost savings in cash expenses45000Terminal value8000Maintenance required in the 4th year5000Book value of the old machine20000The new machine would replace an old fully-depreciated machine. The old machine can be sold for $15,000 at the time the new equipment is acquired. The income tax rate is 30%, and the discount rate is 12%. Arnold uses the straight-line method for depreciation on all machines (ignore the half-year convention).
The present value of the total tax savings from the depreciation tax shield is

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The Answer of Arnold is acquiring a new machine with a life of 5 years for use on its production line. The following data relate to this purchase: Cost of new machine$100000Annual cost savings in cash expenses45000Terminal value8000Maintenance required in the 4th year5000Book value of the old machine20000The new machine would replace an old fully-depreciated machine. The old machine can be sold for $15,000 at the time the new equipment is acquired. The income tax rate is 30%, and the discount rate is 12%. Arnold uses the straight-line method for depreciation on all machines (ignore the half-year convention).
The present value of the total tax savings from the depreciation tax shield is

Arnold Is Acquiring a New Machine with a Life of 5