Ms. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new kiln for $480,000. Of this sum, $58,000 is described by the supplier as an installation cost. Ms. Potts does not know whether the Internal Revenue Service (IRS) will permit the company to treat this cost as a tax-deductible first-year expense or as a capital investment. In the latter case, the company could depreciate the $58,000 using the five-year MACRS tax depreciation schedule. http://lectures.mhhe.com/connect/0078034760/MACRS.JPG

Assume the tax rate is 35% and the opportunity cost of capital is 8%. Calculate the value of the tax shield 1 and tax shield 2. (Note: Use Tax shield 1 as an expense treatment and tax shield 2 as 5 year MACRS.) (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

Tax shield 1 $

Tax shield 2 $