In: Accounting
A-13 Present Value of Cash Flows Rush Corporation plans to acquire production equipment for $625,000 that will be depreciated for tax purposes as follows: year 1, $125,000; year 2, $215,000; and in each of years 3 through 5, $95,000 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 other intermediate calculations to nearest whole number.) b. Compute the present value of the tax shield from depreciation assuming straight-line depreciation ($125,000 per year). (Round PV factor to 3 decimal places and other intermediate calculations to nearest whole number.)