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Depreciation Tax Shields Mendata Company has purchased equipment for $150,000. After it is fully depreciated, the equipment will have no salvage value. Mendota may select
Depreciation Tax Shields Mendata Company has purchased equipment for $150,000. After it is fully depreciated, the equipment will have no salvage value. Mendota may select either of the following depreciation schedules for tax purposes: Option 1 Option 2 Year Depreciation Depreciation 1 $30,000 $15.000 2 30.000 3 28.800 30.000 17.280 30,000 5 17.280 30,000 6 8,640 15.000 48.000 Assuming a 40% tax rate and a 12% desired annual return, compute the total present value of the tax savings provided by these alternative depreciation tax shields. Round answers to the nearest whole number. Use rounded answers to calculate total, Option 1 depreciation: Year (N) Tax Savings (FV) Present Value 1 $ 0 D 2 0 3 0 0 4 0 D 5 0 D 6 0 0 Option 2 depreciation: Year (N) Tax Savings (FV) Present Value OS D 2 3 0 D 0 D 4 0 0 5 0 0 0 0 0 $ Which depreciation schedule would be more attractive to Mendota? Please answer all parts of the
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