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Exercise A-13 (Algo) Present Value of Cash Flows Rush Corporation plans to acquire production equipment for $602,500 that will be depreciated for tax purposes as

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Exercise A-13 (Algo) Present Value of Cash Flows Rush Corporation plans to acquire production equipment for $602,500 that will be depreciated for tax purposes as follows: year 1, $120,500; year 2, $210,500; and in each of years 3 through 5, $90,500 per year. A 6 percent discount rate is appropriate for this asset, and the company's tax rate is 40 percent. Use Exhibit A.8 and Exhibit A.9. Required: a. Compute the present value of the tax shield resulting from depreciation. b. Compute the present value of the tax shield from depreciation assuming straight-line depreciation ($120,500 per year)

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