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| Teaching Since: | May 2017 |
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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Rush Corporation plans to acquire production equipment for $600,000 that will be depreciated for tax purposes as follows: year 1, $120,000; year 2, $210,000; and in each of years 3 through 5, $90,000 per year. An 8 percent discount rate is appropriate for this asset, and the company’s tax rate is 40 percent.
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 ($120,000 per year).
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