Problem

Mind Challenge. Inc. publishes innovati ve science textbooks for public schools. The compa...

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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