Company ABC is considering a new project that will require $1.5 million on new equipment at the start of the project.  The equipment will have a depreciable life of 12 years and will be depreciated to a book value of $200,000 using straight-line depreciation.  The cost of capital is 9%, and the firm’s tax rate is 25%.  Estimate the present value of tax benefits from depreciation.

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Q: What are the Equivalent annual savings?

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A: The NPV analysis is used to figure out the value of an investment by using the concept of the time…

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