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(13,735 and 13,736 are incorrect for b) Ms. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new
(13,735 and 13,736 are incorrect for b) Ms. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new kiln for $570,000 of this sum, $67,000 is described by the supplier as an installation cost. Ms. Potts does not know whether the company will need to treat this cost as a tax- deductible current expense or as a capital investment. In the latter case, the company could depreciate the $67000 straight-line over five years How will the tax authority's decision affect the after-tax cost of the kiln? The tax rate is 25%, and the opportunity cost of capital is 7%. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) PV Tax shield Installation cost is expensed at the end of year 1 After tax cost is smaller If installation costis capital rod and depreciated over 5 years After tax cost is larger
(13,735 and 13,736 are incorrect for b)
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