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).

Use the spreadsheet to determine the after-tax internal rate of return. For this problem, assumea a 10 year analysis period, straight-line depreciation is used, 21% corporate tax rate , an initial cost of $ 200,000, an annual benefit of $60,000 and no salvage value but instead you must pay a disposal fee of $20,000 that your corporate accountant determined is tax deductible.

Mf1. Consider an asset that costs $492,800 and is depreciated straight-line to zero over its 6-year tax life. The asset is to be used in a 2-year project; at the end of the project, the asset can be sold for $61,600.        If the relevant tax rate is 22 percent, what is the aftertax cash flow from the sale of this asset?

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.  Required: Compute the present value of the tax shield resulting from depreciation.   2. Compute the present value of the tax shield from depreciation assuming straight-line depreciation ($169,000 per year).

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A Company is considering a proposal of installing a drying equipment. The equipment would involve a Cash outlay of 6,00,000 and net Working Capital of 80,000. The expected life of the project is 5 years without any salvage value. Assume that the company is allowed to charge depreciation on straight-line basis for Income-tax purpose. The estimated before-tax cash inflows are given below: Year Before-tax Cash inflows ('000) 1 2 3 4 5 240 275 210 180 160 The applicable Income-tax rate to the Company is 35%. If the Company's opportunity Cost of Capital is 12%, calculate the equipment's discounted payback period, payback period, net present value and internal rate of return. The PV factors at 12%, 14% and 15% are: Year 1 2 3 4 5 PV factor at 12% 0.8929 0.7972 0.7118 0.6355 0.5674 PV factor at 14% 0.8772 0.7695 0.6750 0.5921 0.5194 PV factor at 15% 0.8696 0.7561 0.6575 0.5718 0.4972 10-22

An asset used in a 4-year project falls in the 5-year MACRS class (MACRS Table) for tax purposes. The asset has an acquisition cost of $18,720,000 and will be sold for $4,160,000 at the end of the project. If the tax rate is 22 percent, what is the aftertax salvage value of the asset?

3. Solar Solutions has purchased new manufacturing equipment that cost $400,000. Calculate the yearly tax savings from the CCA tax shield for the next three years. Assume that the income tax rate is 30%, the CCA rate is 30%, and the weighted-average cost of capital (WACC) is 12%. Assume that CCA in the first year is subject to the accelerated depreciation method for the year of acquisition. (Hint. Use Microsoft Excel to calculate the discount factor(s).) (Do not round your intermediate calculations. Round your final answers to 2 decimal places.) X Answer is complete but not entirely correct. Year 1 2 3 $ $ $ PV of Tax Savings 91,071.43 x 56,919.64 X 35,574.78 X

An asset used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $6,000,000 and will be sold for $1,200,000 at the end of the project. If the tax rate is 34 percent, what is the aftertax salvage value of the asset? Refer to the MACRS schedule. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) Aftertax salvage value S