Sprockets, Inc. made an investment into three different long term assets. The first was purchased for...

Sprockets, Inc. made an investment into three different long term assets. The first was purchased for 750,000 and will be depreciated at a straight line for five years. The second was an investment of $1,000,000 and will be depreciated using the 5-year MACRS method. The third cost $1,500,000 and will be depreciated utilizing 7-years MACRS. The company’s required rate of return is 10% and the tax rate is 21%.
1. What is the depreciation schedule for the first asset?
2. What is the depreciation schedule for the second asset?
3. What is the depreciation schedule for the third asset?
4. What is the present value of the tax shield generated by all three assets?

Year	3-yr	5-yr	7-yr
1	33.33%	20%	14.29%
2	44.45%	32%	24.49%
3	14.81%	19.2%	17.49%
4	7.41%	11.52%	12.49%
5		11.52%	8.93%
6		5.76%	8.92%
7			8.93%
8			4.46%

Expert Solution

jeff jeffy answered 1 year ago

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