Grove Media plans to acquire production equipment for $845,000 that will be depreciated for tax purposes as follows: year 1,$329,000; year 2, $189,000; and in each of years 3 through 5, $109,000 per year. A 10 percent discount rate is appropriate for thisasset, and the company's tax rate is 20 percent. Use Exhibit A.8 and Exhibit A.9.Required:a. Compute the present value of the tax shield resulting from depreciation.b. Compute the present value of the tax shield from depreciation assuming straight-line depreciation ($169,000 per year).Complete this question by entering your answers in the tabs below.Required A Required BCompute the present value of the tax shield resulting from depreciation.Note: Round PV factor to 3 decimal places.Present value of the tax shield< Required ARequired B > Exhibit A.9Present Value of an Annuity of $1Year 1/2%120.9951.985 1.9702.9703.9504.9265.8966.8627.8238.779109.73011 10.6771213141534525%30% 35% 40%1% 2%0.990 0.9801.9422.941 2.8843.902 3.8084.853 4.7135.795 5.6016.728 6.4724% 5% 6% 8% 10% 12% 14% 15% 16% 18% 20% 22%24%0.962 0.9520.9430.926 0.909 0.893 0.877 0.870 0.862 0.847 0.833 0.8200.806 0.800 0.769 0.741 0.7141.886 1.859 1.833 1.783 1.736 1.690 1.647 1.626 1.605 1.566 1.528 1.492 1.457 1.440 1.361 1.289 1.2242.775 2.723 2.673 2.577 2.487 2.402 2.322 2.283 2.246 2.174 2.106 2.042 1.981 1.952 1.816 1.696 1.5893.630 3.546 3.465 3.312 3.170 3.037 2.914 2.855 2.798 2.690 2.589 2.494 2.404 2.362 2.166 1.997 1.8494.452 4.329 4.212 3.993 3.791 3.605 3.433 3.352 3.274 3.127 2.991 2.864 2.745 2.689 2.436 2.220 2.0355.242 5.076 4.917 4.623 4.355 4.111 3.889 3.784 3.685 3.498 3.326 3.167 3.020 2.951 2.643 2.385 2.1686.002 5.786 5.582 5.206 4.868 4.564 4.288 4.160 4.039 3.812 3.605 3.416 3.242 3.161 2.802 2.508 2.2636.733 6.463 6.210 5.747 5.335 4.968 4.639 4.487 4.344 4.078 3.837 3.619 3.421 3.329 2.925 2.598 2.3317.435 7.108 6.802 6.247 5.759 5.328 4.946 4.772 4.607 4.303 4.031 3.786 3.566 3.463 3.019 2.665 2.3797.7226.145 5.650 5.216 5.019 4.833 4.494 4.192 3.923 3.682 3.571 3.092 2.715 2.4148.3066.4955.938 5.453 5.234 5.029 4.6564.327 4.035 3.776 3.656 3.147 2.752 2.4389.385 8.863 8.3846.814 6.194 5.660 5.421 5.197 4.793 4.439 4.127 3.851 3.725 3.190 2.779 2.4567.103 6.424 5.842 5.583 5.342 4.910 4.533 4.2033.780 3.2236.0026.811 6.1427.6527.3258.5668.1629.4718.9838.11110.368 9.7878.7607.360 6.7107.887 7.1397.53611.619 11.255 10.57512.556 12.134 11.348 9.9869.394 8.8537.9043.9122.7992.4699.899 9.2958.2447.3676.6285.724 5.468 5.0083.9623.824 3.2492.8142.47813.489 13.004 12.106 10.56314.417 13.865 12.849 11.118 10.380 9.712 8.5594.611 4.2654.675 4.315 4.001 3.8597.6065.847 5.575 5.0923.2682.8252.4846789ان اسلالوار اماماتahalJud.....ala-

A tax shield is a decrease in an individual's or corporation's taxable income that is accomplished…

Grove Media plans to acquire production equipment for $845,000 that will be depreciated for tax purposes as follows: year 1, $329,000; year 2, $189,000; and in each of years 3 through 5, $109,000 per year. A 10 percent discount rate is appropriate for this asset, and the company's tax rate is 20 percent. Use Exhibit A.8 and Exhibit A.9. Required: a. Compute the present value of the tax shield resulting from depreciation. b. Compute the present value of the tax shield from depreciation assuming straight-line depreciation ($169,000 per year).

Grove Media plans to acquire production equipment for $845,000 that will be depreciated for tax purposes as follows: year 1, $329,000; year 2, $189,000; and in each of years 3 through 5, $109,000 per year. A 10 percent discount rate is appropriate for this asset, and the company's tax rate is 20 percent. Use Exhibit A.8 and Exhibit A.9. Required: a. Compute the present value of the tax shield resulting from depreciation. b. Compute the present value of the tax shield from depreciation assuming straight-line depreciation ($169,000 per year).

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 18E

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