Mendota Company has purchased equipment for $400,000. 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	$80,000	$40,000
2	128,000	80,000
3	76,800	80,000
4	46,080	80,000
5	46,080	80,000
6	23,040	40,000

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	Answer	Answer
2	Answer	Answer
3	Answer	Answer
4	Answer	Answer
5	Answer	Answer
6	Answer	Answer
		Answer

Option 2 depreciation:

Year (N)	Tax Savings (FV)	Present Value
1	Answer	Answer
2	Answer	Answer
3	Answer	Answer
4	Answer	Answer
5	Answer	Answer
6	Answer	Answer
		Answer

Which depreciation schedule would be more attractive to Mendota?

AnswerOption 1Option 2

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