Mind Challenge. Inc. publishes innovati ve science textbooks for public schools. The company's managementrecently acquired the following two new pieces of equipment.
? Computer-controlled printing press: cost, $250.000; expected useful life, 12 years.
? Duplicating equipment to be used in the administrative offices: cost. $60,000; expected useful life.six years.
The company uses straight-line depreciation for book purposes and the MACRS accelerated depreciationschedule for tax purposes. The firm 's tax rate is 40 percent; its after-tax hurdle rate is 10percent.Neither machine has any salvage value.
Required: For each of the publishing company's new pieces of equipment:
1. Prepare a schedule of the annual depreciation expenses for book purposes.
2. Determine the appropriate MACRS property class.
3. Prepare a schedule of the annual depreciation expenses for tax purposes.
4. Computethe present value of the depreciation tax shield.
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