A company purchases an asset that costs $110,000. This asset qualifies as 3-year property under MACRS. The company uses an after- tax discount rate of 15% and faces a 40% income tax rate. (a) Use the appropriate present value factors found in Appendix C, Table 1, to determine the present value of the depreciation deductions for this firm over the specified four-year period. Refer to Exhibit 12.4. (Round "MACRS %" to 2 decimal places (i,e. 0.1234 = 12.34%), "PV factor" to 3 decimal places. Round your answers to 2 decimal places.) Year Depreciation Deduction Tax Savings Present Values 1 2 3 4 $ 0.00 $ 0.00 $ 0.00 TABLE 1 Present Value of $1 Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 20% 25% 30% 1 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.833 0.800 0.769 2 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.756 0.694 0.640 0.592 3 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.579 0.512 0.455 4 5 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.482 0.410 0.350 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.402 0.328 0.269 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.432 0.335 0.262 0.207 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.376 0.279 0.210 0.159 6 7 S 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.233 0.168 0.123 9 10 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.284 0.194 0.134 0.094 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0.247 0.162 0.107 0.073 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0.215 0.135 0.086 0.056 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0.231 0.208 0.187 0.112 0.069 0.043 11 12 13 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182 0.163 0.093 0.055 0.033 14 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0.078 0.044 0.025 14 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0.078 0.044 0.025 15 16 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 0.123 0.065 0.035 0.020 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.18 0.163 0.141 0.123 0.107 0.054 0.028 0.015 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 0.125 0.108 0.093 0.045 0.023 0.012 17 18 19 20 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 0.111 0.095 0.081 0.038 0.018 0.009 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.138 0.116 0.098 0.083 0.070 0.031 0.014 0.007 0.456 0.377 0.312 0.258 0.215 0.178 0.149 0.124 0.104 0.087 0.073 0.061 0.026 0.012 0.005 0.422 0.342 0.278 0.226 0.134 0.150 0.123 0.101 0.083 0.068 0.056 0.046 0.018 0.007 0.003 0.390 0.310 0.247 0.197 0.158 0.126 0.102 0.082 0.066 0.053 0.043 0.035 0.013 0.005 0.002 22 24 25 30 0.375 0.295 0.233 0.184 0.146 0.116 0.092 0.074 0.059 0.047 0.038 0.030 0.010 0.004 0.001 0.308 0.231 0.174 0.131 0.099 0.075 0.057 0.044 0.033 0.026 0.020 0.015 0.004 0.001 0.000 0.253 0.181 0.130 0.094 0.068 0.049 0.036 0.026 0.019 0.014 0.010 0.008 0.002 0.000 0.000 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.015 0.011 0.008 0.005 0.004 0.001 0.000 0.000 35 40 Note: The present value (PV) factor for N periods and rate r per period = 1= (1 + r). For example, the PV factor for 10%. 5 years = 1 = (1 + 0.10) = 0.621 (rounded). EXHIBIT 12.4 MACRS Depreciation Rates Year 3-year 5-year 7-year 10-year 15-year 20-year 1 33.33 20.00 14.29 10.00 5.00 3.75 2. 44.45 32.00 24.49 18.00 9.50 7.22 3 14.81 19.20 17.49 14.40 8.55 6.68 4 7.41 11.52* 12.49 11.52 7.70 6.18 5 11.52 8.93* 9.22 6.93 5.71 6 5.76 8.92 7.37 6.23 5.28 7 8.92 6.55* 5.90* 4.89 8 4.47 6.55 5.90 4.52 9 6.56 5.91 4.46* 10 6.55 5.90 4.46 11 3.28 etc. etc. *First year of switching to the straight-line method. Source: www.irs.gov/publications/p946/