Question
Rush Corporation plans to acquire production equipment for $620,000 that will be depreciated for tax purposes as follows: year 1, $124,000; year 2, $214,000; and
Rush Corporation plans to acquire production equipment for $620,000 that will be depreciated for tax purposes as follows: year 1, $124,000; year 2, $214,000; and in each of years 3 through 5, $94,000 per year. An 10 percent discount rate is appropriate for this asset, and the companys tax rate is 40 percent. |
Required: |
(a) | Compute the present value of the tax shield resulting from depreciation.(Round present value factor for each year to three decimal places and other computations to nearest whole dollar value.) |
(b) | Compute the present value of the tax shield from depreciation assuming straight-line depreciation ($124,000 per year).(Round present value factor for each year to three decimal places and other computations to nearest whole dollar value.) |
Answer Part A & B using the given information |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started