Freedom Corporation acquired a fixed asset for $210,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rate of 6% and an income tax rate of 40%. (Use Exhibit 12.4, Appendix C, TABLE 1 and Appendix C, TABLE 2.)

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EXHIBIT 12.4 MACRS Depreciation Rates Year 3-year 5-year 7-year 10-year 15-year 20-year 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. TABLE 2 Present Value of Annuity of $1 Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 20% 25% 30% 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 1.759 1.736 1.713 1.690 1.668 1.647 1.626 1.528 1.440 1.361 2. 1.886 1.859 1.833 1.SOS 1.783 3 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.444 2.402 2.361 2.322 2.283 2.106 1.952 1.816 3.387 3.312 3.240 3.170 3.102 3.037 2.974 2.914 2.855 2.589 2.362 2.166 4 3.630 3.546 3.465 5 4.452 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 2.991 2.689 2.436 4.329 4.212 4.100 5.076 4.917 4.767 6 5.242 4.623 4.486 4.355 4.231 4.111 3.998 3.889 3.784 3.326 2.951 2.643 7 6.002 5.389 5.786 5.582 6.463 6.210 6.733 5.971 9 7.435 7.108 6.802 6.515 5.206 5.033 4.86S 4.712 4.564 4.423 4.288 4.160 3.605 3.161 2.802 5.747 5.535 5.335 5.146 4.968 4.799 4.639 4.487 3.837 3.329 2.925 6.247 5.995 5.759 5.537 5.328 5.132 4.946 4.772 4.031 3.463 3.019 6.710 6.418 6.145 5.889 5.650 5.426 5.216 5.019 4.192 3.571 3.092 7.139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 4.327 3.656 3.147 10 8.111 7.024 7.722 7.360 8.306 7.887 11 8.760 7.499 12 9.385 8.863 8.384 7.943 7.536 7.161 6.814 6.492 6.194 5.918 5.660 5.421 4.439 3.725 3.190 7.904 7.487 7.103 6.750 6.424 6.122 5.342 5.583 4.533 3.780 3.223 13 9.986 9.394 8.853 8.358 14 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6.628 6.302 6.002 5.724 4.611 3.824 3.249 15 11.118 10.380 9.712 9.108 16 11.652 10.838 10.106 9.447 12.166 11.274 10.477 9.763 8.559 8.061 7.606 7.191 6.811 6.462 6.142 5.847 4.675 3.859 3.268 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954 4.730 3.887 3.283 9.122 8.544 8.022 7.549 7.120 6.729 6.373 6.047 4.775 3.910 3.295 9.372 8.756 8.201 7.702 7.250 6.840 6.467 6.128 4.812 3.928 3.304 17 18 12.659 11.690 10.828 10.059 13.134 12.085 11.158 10.336 19 9.604 S.950 8.365 7.839 7.366 6.938 6.550 6.198 4.843 3.942 3.311 20 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7.469 7.025 6.623 6.259 4.870 3.954 3.316 14.451 13.163 12.042 11.061 10.2019.442 8.772 8.176 7.645 7.170 6.743 6.359 4.909 3.970 3.323 22 24 25 30 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8.348 7.784 7.283 6.835 6.434 4.937 3.981 3.327 15.622 14.094 12.783 11.654 10.675 9.823 9.077 8.422 7.843 7.330 6.873 6.464 4.948 3.985 3.329 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 7.496 7.003 6.566 4.979 3.995 3.332 18.665 16.374 14.498 12.948 11.655 10.567 9.644 8.855 8.176 7.586 7.070 6.617 4.992 3.998 3.333 19.793 17.159 15.046 13.332 11.925 10.757 9.779 5.951 8.244 7.634 7.105 6.642 4.997 3.999 3.333 35 40 Note: The present value (PV) annuity factor for N periods and a rate of r per period = [1 - (1 + r)-MJ = 7. For example, for N = 5 and r= 0.10, the PV annuity factor = 3.791 (rounded). TABLE 1 Present Value of $1 Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 20% 25% 30% 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 0.500 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 4 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 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 5 6 7 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 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 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 9 10 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 11 12 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 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 13 14 15 16 17 18 19 20 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 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 0.188 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 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 0.184 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 0.375 0.295 0.233 0.134 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 22 24 25 30 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 +0.10,9 = 0.621 (rounded) Required 1 Required 2 Required 3 What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years'- digits (SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges. (Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar) Incremental PV of tax savings using SYD depreciation Required 1 Required 2 Required 3 What is the incremental present value of the tax benefits resulting from calculating depreciation using the double-declining- balance (DDB) method rather than the straight-line (SLN) method on this asset? Use the SLN and DDB functions in Excel to calculate depreciation charges. (Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar.) Show less Incremental PV of tax savings using DDB depreciation Required 1 Required 2 Required 3 What is the incremental present value of the tax benefits resulting from using MACRS rather than straight-line (SLN) depreciation? The asset qualifies as a 3-year asset. Use the half-year convention. (Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar.) Incremental PV of tax savings using MACRS depreciation