Exercise A-16 (Static) Present Value of Cash Flows Grove Media plans to acquire production equipment for $800,000 that will be depreciated for tax purposes as follows: year 1, $320,000; year 2, $180,000; and in each of years 3 through 5, $100,000 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 ($160,000 per year). Complete this question by entering your answers in the tabs below. Required A Required B Compute the present value of the tax shield resulting from depreciation. Note: Round PV factor to 3 decimal places. Present value of the tax shield $ 129,039 X < Required A Required B >

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Exercise A-16 (Static) Present Value of Cash Flows
Grove Media plans to acquire production equipment for $800,000 that will be depreciated for tax purposes as follows: year 1,
$320,000; year 2, $180,000; and in each of years 3 through 5, $100,000 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 ($160,000 per year).
Complete this question by entering your answers in the tabs below.
Required A
Required B
Compute the present value of the tax shield resulting from depreciation.
Note: Round PV factor to 3 decimal places.
Present value of the tax shield
$
129,039 X
< Required A
Required B
>
Transcribed Image Text:Exercise A-16 (Static) Present Value of Cash Flows Grove Media plans to acquire production equipment for $800,000 that will be depreciated for tax purposes as follows: year 1, $320,000; year 2, $180,000; and in each of years 3 through 5, $100,000 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 ($160,000 per year). Complete this question by entering your answers in the tabs below. Required A Required B Compute the present value of the tax shield resulting from depreciation. Note: Round PV factor to 3 decimal places. Present value of the tax shield $ 129,039 X < Required A Required B >
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