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Grove Media plans to acquire production equipment for $807,500 that will be depreciated for tax purposes as follows: year 1 , $321,500; year 2,$181,500; and
Grove Media plans to acquire production equipment for $807,500 that will be depreciated for tax purposes as follows: year 1 , $321,500; year 2,$181,500; and in each of years 3 through 5,$101,500 per year. A10 percent discount rate is appropriate for this asset, and the company's tax rate is 20 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 (\$161,500 per year). Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Compute the present value of the tax shield resulting from depreciation. Note: Round PV factor to 3 decimal places. Grove Media plans to acquire production equipment for $807,500 that will be depreciated for tax purposes as follows: year 1 , $321,500; year 2,$181,500; and in each of years 3 through 5,$101,500 per year. A10 percent discount rate is appropriate for this asset, and the company's tax rate is 20 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 (\$161,500 per year). Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Compute the present value of the tax shield resulting from depreciation. Note: Round PV factor to 3 decimal places
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