Compute Present Value of Tax Shield: The Financial Press Co. plans to acquire desktop publishing equipment at a cost of $200,000 that will be depreciated for tax purposes as follows: Year 1 , $40,000; Year 2, $70,000; and $30,000 per year in each of Years 3-5. A 22 percent discount rate is appropriate for this asset, and the company's tax rate is 40 percent. 

Required:

a. Compute the present value of the tax shield resulting from depreciation. Refer to Illustration 15-12 for format.

b. Compute the present value of the tax shield from depreciation assuming straight- time depreciation ($40,000 per year). Refer to Illustration 15-12 for format.

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Year Depreciation Tax Shield at % Present Value Factor Present Value 12345 Totals Net present value of tax shield: Refer to Illustration 15-12 above to compute the present value of depreciation tax shields.