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Ideal Pots & China just ordered a new kiln for $260,000. Find the present value of the tax shields for the following cases:

(1) depreciate the kiln based on the MACRS 3-year depreciation, and (2) depreciate straight-line over four years.

Suppose the tax rate is 28%, and the opportunity cost of capital is 7.5%. Find the present value of the tax shields for case 1 and 2 (PV1, PV2).

(Hint: tax-shields = depreciation x tax rate. In other words, the tax that is saved due to the reduction in taxable income due to depreciation)

a. ($53498, $51937)

b. ($56510, $54427)

c. ($63291, $60958)

d. ($66212, $64536)

e. ($70476, $72749)