Rush Corporation plans to acquire production equipment for $602,500 that will be depreciated for tax purposes as follows: year 1, $120,500; year 2, $210,500; and in each of years 3 through 5, $90,500 per year. A 6 percent discount rate is appropriate for this asset, and the company’s tax rate is 40 percent. Use Exhibit A.8 and Exhibit A.9.
Required:
a. Compute the present value of the tax shield resulting from depreciation. (Round PV factor to 3 decimal places and other intermediate calculations to nearest whole number.)
b. Compute the present value of the tax shield from depreciation assuming straight-line depreciation ($120,500 per year). (Round PV factor to 3 decimal places and other intermediate calculations to nearest whole number.)
The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.
Rush Corporation plans to acquire production equipment for $602,500 that will be depreciated for tax purposes...
Rush Corporation plans to acquire production equipment for $635,000 that will be depreciated for tax purposes as follows: year 1, $127,800; year 2, $217,000; and in each of years 3 through 5, $97,000 per year. A 12 percent discount rate is appropriate for this asset, and the company's tax rate is 40 percent. Use Exhibit A.8 and Exhibit A9 Required: a. Compute the present value of the tax shield resulting from depreciation. (Round PV factor to 3 decimal places and...
Rush Corporation plans to acquire production equipment for $612,500 that will be depreciated for tax purposes as follows: year 1, $122,500; year 2, $212,500; and in each of years 3 through 5, $92,500 per year. A 14 percent discount rate is appropriate for this asset, and the company’s tax rate is 40 percent. Use Exhibit A.8 and Exhibit A.9. Required: a. Compute the present value of the tax shield resulting from depreciation. (Round PV factor to 3 decimal places and...
Rush Corporation plans to acquire production equipment for $622,500 that will be depreciated for tax purposes as follows: year 1, $124,500; year 2, $214,500; and in each of years 3 through 5, $94,500 per year. A 12 percent discount rate is appropriate for this asset, and the company’s tax rate is 40 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...
Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $76,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $33,800. A new plece of equipment will cost $150,000. It also falls into the five-year category for MACRS depreciation. Assume the new equipment would provide the following stream of added cost savings for the next six years. Use Table 12-12. Use Appendix B for an approximate answer but calculate your...
Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $80,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $35,800. A new piece of equipment will cost $240,000. It also falls into the five-year category for MACRS depreciation. Assume the new equipment would provide the following stream of added cost savings for the next six years. Use Table 12– 12. Use Appendix B for an approximate answer but calculate...
Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $66,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $28,800. A new piece of equipment will cost $156,000. It also falls into the five-year category for MACRS depreciation. Assume the new equipment would provide the following stream of added cost savings for the next six years. Use Table 12–12. Use Appendix B for an approximate answer but calculate your...
Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $96,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $43,800. A new piece of equipment will cost $210,000. It also falls into the five-year category for MACRS depreciation. Assume the new equipment would provide the following stream of added cost savings for the next six years. Use Table 12–12. Use Appendix B for an approximate answer but calculate your...
Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $56,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $23,800. A new piece of equipment will cost $146,000. It also falls into the five-year category for MACRS depreciation. Assume the new equipment would provide the following stream of added cost savings for the next six years. Use Table 12-12. Use Appendix B for an approximate answer but calculate your...
Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $50,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $20,800. A new piece of equipment will cost $140,000. It also falls into the five-year category for MACRS depreciation. Assume the new equipment would provide the following stream of added cost savings for the next six years. Use Table 12–12. Use Appendix B for an approximate answer but calculate your...
Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $74,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $32,800. A new piece of equipment will cost $210,000. It also falls into the five-year category for MACRS depreciation. Assume the new equipment would provide the following stream of added cost savings for the next six years. Use Table 12–12. Use Appendix B for an approximate answer but calculate your...