Mr. Nagano bought a new $35,000 freezer for his grocery store on January 2, 2013. The freezer has a 7-year economic life and recovery period, Mr. Nagano's required rate of return is 5%, and his tax rate is 30%. (Click the icon to view the present value of $1 of MACRS Depreciation table.) (Click the icon to view the present value factor table.) (Click the icon to view the present value annuity factor table.) Read the fequirements Requirement 1. Suppose Mr. Nagano uses straight-line depreciation for tax purposes. Compute the PV of the tax savings from depreciation. Assume that Mr. Nagano takes a full year of depreciation at the end of 2013. (Enter the present value factor to four decimal places, "X.XXXX" Round dollar amounts the nearest whole number.) Present Value of Annual Cash Total Present Ordinary Annuity of $1 at 7 years, 5% Inflow Value Present value of annuity of equal annual: After-tax cash savings from depreciation 5.7864 per year Requirement 2. Suppose Mr. Nagano uses MACRS depreciation for tax purposes, Compute the PV of the tax savings from depreciation (Round your answer to the nearest whole number.) Begin by selecting the formula you will need to calculate this amount PV of the MACRS Tax Savings The PV of the tax savings from depreciation using MACRS is $ Requirement 3. Suppose Mr. Nagano was allowed to immediately deduct the entire cost of the freezer for tax purposes. Compute the PV of the tax savings from depreciation. Begin by selecting the formula you will need to calculate this amount. Requirement 2. Suppose Mr. Nagano uses MACRS depreciation for tax purposes. Compute the PV of the tax savings from depreciation. (Round your answer to the nearest whole number.) Begin by selecting the formula you will need to calculate this amount. PV of the MACRS Tax Savings The PV of the tax savings from depreciation using MACRS is $ Requirement 3. Suppose Mr. Nagano was allowed to immediately deduct the entire cost of the freezer for tax purposes. Compute the PV of the tax savings from depreciation. Begin by selecting the formula you will need to calculate this amount PV of the Immediate Write-off Tax Savings The PV of the tax saving from the immediate deduction of the freezer for tax purposes is $. Requirement 4. Which of the three methods of deducting the cost of the freezer would Mr. Nagano prefer if all three were allowable for tax purposes? Why? Mr. Nagano would prefer the under all three methods, however, only the method of deducting the cost of the freezer. The total tax savings is $ provides the entire savings Present Value of $1 Period 3% 4% 5% 6% 7% 12% 14% 16% 18% 20% 25% 8% 10% 92599091 1 .9709 9615 .9524 .9434 9346 .8929 .8475 .8333 8000 .8772 .8621 .7695 7432 2 9426 .9246 9070 8900 8734 8573 8264 .7972 .7182 6944 6400 .5120 3 9151 .8890 .8638 .8396 .8163 .7938 .7513 7118 .6750 6407 6086 .5787 4 .8885 .8548 8227 .7921 .7629 7350 6830 .6355 5921 5523 .5158 -4823 4096 5 .8626 8219 .7835 .7473 -7130 6806 6209 .5674 5194 4761 4371 40193277 6 .8375 .7903 .7462 .7050 .6663 .63025645 5066 .4556 4104 3704 3349 .2621 7 .8131 7599 .7107 .6651 6227 .5835 5132 4523 3996 3538 3139 .2791 .2097 8 7894 7307 .6768 .6274 .5820 5403 4665 4039 3506 3050 2660 2326 1678 9 7664 7026 .6446 .5439 .50024241 3606 3075 2630 2255 1938 .1342 .5919 .5584 10 .7441 6756 .6139 5083 ,4632 3855 3220 .1074 12 .7014 .6246 5568 4970 4440 3971 .3186 2567 2697 2267 1911 1615 2076 1685 1372 1122 1401 1079 .0835 .0649 0687 15 .6419 5553 4810 .4173 .3624 3152 .2394 . 1827 0352 .0180 18 .5874 4936 4155 3503 2959 2502 1799 1300 0946 .0691 T! .0508 .0376 20 -5537 .4564 3769 13118 2584 2145 .1486 1037 .0261 0115 R 25 4776 .3751 2953 2330 1842 .1460 0923 .0588 .0728 .0514 0365 .0378 .0245 .0160 .0255 .0157 0097 0105 .0038 28 4371 .3335 2551 .1956 1504 1159 .0693 .0419 0061 0019 M 30 4120 .3083 2314 .1741 .1314 .0994 0573 0334 0196 0116 .0070 0042 0012 un SH Print Done ta Period R 1 3% 4% 5% 6% 7% 8% 10% 12% 14% 16% 18% 20% 25% .9709 -9615 .9524 9434 .9346 .9259 .9091 8929.8772862184758333 8000 1.9135 1.8861 1.8594 1.8334 1.8080 1.7833 1.7355 1.6901 1.6467 1.6052 1.5656 1.5278 1.4400 2 3 R do 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771 2.4869 2.4018 2.3216 2.2459 2.1743 2.1065 1.9520 3.7171 3.6299 3,5460 3.4651 3.3872 3.3121 3.1699 3.0373 2.9137 2.7982 2.6901 2.5887 2.3616 4 BA 5 4.5797 4.4518 4.3295 4.2124 4.1002 3.9927 3.7908 3.6048 3.4331 3.2743 3.1272 2.9906 2.6893 6 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.3553 4.1114 3.8887 3.6847 3.4976 3.3255 2.9514 7 8 2 9 10 B 12 15 6.2303 6.0021 5.7864 5.5824 5.3893 5.2064 4.8684 4.5638 4.2883 4.0386 3.8115 3.6046 3.1611 7.0197 6.7327 6.4632 6.2098 5.9713 5.7466 5.3349 4.9676 4.6389 4.3436 4.0776 3.8372 3.3289 7.7861 7.4353 7.1078 6.8017 6.5152 6.2469 5.7590 5.3282 4.9464 4.6065 4.3030 4.0310 3.4631 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.1446 5.6502 5.2161 4.8332 4.4941 4.1925 3.5705 9.9540 9.3851 8.8633 8.3838 7.9427 7.5361 6.8137 6.1944 5.6603 5.1971 4.7932 4,4392 3.7251 11.9379 11.1184. 10.3797 9.7122 9.1079 8.5595 7.6061 6.8109 6.1422 5.5755 5.0916 4.6755 3.8593 13.7535 12.6593 11.6896 10.8276 10.0591 9.3719 8.2014 7.2497 6.4674 5.8178 5.2732 4.8122 3.9279 14.8775 13.5903 12.4622 11.4699 10.5940 9.8181 8.5136 7.4694 6,6231 5.9288 5.3527 4.8696 3.9539 17.4131 15.6221 14.0939 12.7834 11.6536 10.6748 9.0770 7.8431 6.8729 6.0971 5.4669 4.9476 3.9849 18.7641 16.6631 14.8981 13.4062 12.1371 11.0511 9.3066 7.9844 6.9607 6.1520 5.5016 4.9697 3.9923 19,6004 17.2920 15.3725 13.7648 12.4090 11.2578 9.4269 8.0552 7.0027 6.1772 5.5168 4.9789 3.9950 18 TI 20 R 25 28 M 30 Us Present Value of $1 of MACRS Depreciation Discount Rate 3-year 5-year 7-year 10-year 3% .9439 .9215 .9002 .8698 4% .9264 .8975 .8704 .8324 5% .9095 .8746 .8422 .7975 6% .8931 .8526 .8155 .7649 7% .8772 .8315 .7902 .7344 8% .8617 .8113 .7661 .7059 9% .8468 .7919 .7432 .6792 10% .8322 .7733 .7214 .6541 12% .8044 .7381 .6810 .6084 14% .7782 1.7055 .6441 .5678 15% .7657 .6902 .6270 .5492 16% .7535 .6753 .6106 .5317 18% .7300 .6473 .5798 4993 20% .7079 .6211 .5517 4702 22% .6868 -5968 :5257 4439 24% .6669 5740 .5019 4201 25% .6573 .5631 4906 4090 604 6470 550 4.70 2005 i Data Table - 4% .9264 .8975 .8704 .8324 5% .9095 .8746 .8422 .7975 6% .8931 .8526 .8155 .7649 7% .8772 .8315 .7902 .7344 8% .8617 .8113 .7661 .7059 9% .8468 .7919 .7432 .6792 10% .8322 .7733 .7214 .6541 12% .8044 .7381 .6810 .6084 14% .7782 .7055 .6441 .5678 15% .7657 .6902 .6270 .5492 16% .7535 .6753 18% .7300 .6473 .6106 -5317 5798 4993 .5517 -4702 20% -7079 .6211 22% .6868 .5968 5257 4439 24% .6669 .5740 .5019 .4201 25% .6573 .5631 .4906 4090 26% .6479 .5526 .4798 3985 28% .6299 5327 .4594 .3787 30% .6128 .5139 .4404 3606 40% .5381 .4352 .3632 2896 Print Done