The new boat would last 8 years whereas the old one would last another 4 years. (Assume the salvage values are zero.) The corporate tax rate is 34 percent; depreciation is on a straight-line basis of...

Extracted text: The new boat would last 8 years whereas the old one would last another 4 years. (Assume the salvage values are zero.) The corporate tax rate is 34 percent; depreciation is on a straight-line basis of 25 percent per year (that is, $100,000 per year for 4 years on the overhaul option and $500,000 a year for 4 years on the new boat). The firm's opportunity cost of capital (discount rate) is 20 percent. A. What is the value of the depreciation tax shield per year for the overhaul option? B. What is the present value of the total costs of the overhaul option, taking into account the depreciation tax shield, operating costs, and the initial cost of the overhaul? C. Derive the present value of the total costs associated with the purchase of the new boat at time 0, including all costs, the depreciation tax shield, and revenues from the sale of the old boat. D. Which option, overhaul the old boat or purchase the new one, do you recommend on the basis of the information provided? Explain your reasoning.