23.11
11. Your company is purchasing a $1 million piece of equipment that can be depreciated to zero over 5 years (straight line). You have contracted to sell it for $300,000 at the end of the fourth year. Your corporate tax rate is 34%.

1. Identify and calculate all of the tax implications of buying this machine. (6 pts.)

b. Assume that the NPV of the project if equity financed is $250,000 assuming a discount rate of 10%. You are thinking about using $1 million in debt with an 8% annual coupon to finance the project. If you retire the debt when you sell the equipment, what will the new NPV be? ( 4pts)

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