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). Exhibit A.9Present Value of an Annuity of $1Year 1/2%120.9951.985 1.9702.9703.9504.9265.8966.8627.8238.779109.73011 10.6771213141534525%30% 35% 40%1% 2%0.990 0.9801.9422.941 2.8843.902 3.8084.853 4.7135.795 5.6016.728 6.4724% 5% 6% 8% 10% 12% 14% 15% 16% 18% 20% 22%24%0.962 0.9520.9430.926 0.909 0.893 0.877 0.870 0.862 0.847 0.833 0.8200.806 0.800 0.769 0.741 0.7141.886 1.859 1.833 1.783 1.736 1.690 1.647 1.626 1.605 1.566 1.528 1.492 1.457 1.440 1.361 1.289 1.2242.775 2.723 2.673 2.577 2.487 2.402 2.322 2.283 2.246 2.174 2.106 2.042 1.981 1.952 1.816 1.696 1.5893.630 3.546 3.465 3.312 3.170 3.037 2.914 2.855 2.798 2.690 2.589 2.494 2.404 2.362 2.166 1.997 1.8494.452 4.329 4.212 3.993 3.791 3.605 3.433 3.352 3.274 3.127 2.991 2.864 2.745 2.689 2.436 2.220 2.0355.242 5.076 4.917 4.623 4.355 4.111 3.889 3.784 3.685 3.498 3.326 3.167 3.020 2.951 2.643 2.385 2.1686.002 5.786 5.582 5.206 4.868 4.564 4.288 4.160 4.039 3.812 3.605 3.416 3.242 3.161 2.802 2.508 2.2636.733 6.463 6.210 5.747 5.335 4.968 4.639 4.487 4.344 4.078 3.837 3.619 3.421 3.329 2.925 2.598 2.3317.435 7.108 6.802 6.247 5.759 5.328 4.946 4.772 4.607 4.303 4.031 3.786 3.566 3.463 3.019 2.665 2.3797.7226.145 5.650 5.216 5.019 4.833 4.494 4.192 3.923 3.682 3.571 3.092 2.715 2.4148.3066.4955.938 5.453 5.234 5.029 4.6564.327 4.035 3.776 3.656 3.147 2.752 2.4389.385 8.863 8.3846.814 6.194 5.660 5.421 5.197 4.793 4.439 4.127 3.851 3.725 3.190 2.779 2.4567.103 6.424 5.842 5.583 5.342 4.910 4.533 4.2033.780 3.2236.0026.811 6.1427.6527.3258.5668.1629.4718.9838.11110.368 9.7878.7607.360 6.7107.887 7.1397.53611.619 11.255 10.57512.556 12.134 11.348 9.9869.394 8.8537.9043.9122.7992.4699.899 9.2958.2447.3676.6285.724 5.468 5.0083.9623.824 3.2492.8142.47813.489 13.004 12.106 10.56314.417 13.865 12.849 11.118 10.380 9.712 8.5594.611 4.2654.675 4.315 4.001 3.8597.6065.847 5.575 5.0923.2682.8252.4846789ان اسلالوار اماماتahalJud.....ala- Exhibit A.8Present Value of $1Year 1/2%1234567891011121314151%0.995 0.9900.990 0.9800.985 0.9718% 10% 12% 14% 15% 16% 18% 20% 22% 24% 25% 30% 35% 40%0.800 0.769 0.741 0.7140.640 0.592 0.549 0.5100.512 0.455 0.406 0.3640.410 0.350 0.301 0.2600.328 0.269 0.223 0.1860.262 0.207 0.165 0.1330.210 0.159 0.122 0.0950.980 0.9610.975 0.951 0.9062% 4% 5% 6%0.980 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.870 0.862 0.847 0.833 0.820 0.8060.961 0.925 0.907 0.890 0.8570.826 0.797 0.769 0.756 0.743 0.718 0.694 0.672 0.6500.942 0.889 0.864 0.840 0.794 0.751 0.712 0.675 0.658 0.641 0.609 0.579 0.551 0.5240.924 0.855 0.823 0.792 0.735 0.683 0.636 0.592 0.572 0.552 0.516 0.482 0.451 0.4230.822 0.784 0.747 0.681 0.621 0.567 0.519 0.497 0.476 0.437 0.402 0.370 0.3410.971 0.942 0.888 0.790 0.746 0.705 0.630 0.564 0.507 0.456 0.432 0.410 0.370 0.335 0.303 0.2750.966 0.933 0.871 0.760 0.711 0.665 0.583 0.513 0.452 0.400 0.376 0.354 0.314 0.279 0.249 0.2220.961 0.923 0.853 0.731 0.677 0.627 0.540 0.467 0.404 0.351 0.327 0.305 0.266 0.233 0.204 0.1790.956 0.914 0.837 0.703 0.645 0.592 0.500 0.424 0.361 0.308 0.284 0.263 0.225 0.194 0.167 0.144 0.134 0.094 0.067 0.0480.951 0.905 0.820 0.676 0.614 0.558 0.463 0.386 0.322 0.270 0.247 0.227 0.191 0.162 0.137 0.116 0.107 0.073 0.050 0.0350.947 0.896 0.804 0.650 0.585 0.527 0.429 0.350 0.287 0.237 0.215 0.195 0.162 0.135 0.112 0.094 0.086 0.056 0.0370.788 0.625 0.557 0.497 0.397 0.319 0.257 0.208 0.187 0.168 0.137 0.112 0.092 0.076 0.069 0.043 0.0270.937 0.879 0.773 0.601 0.530 0.469 0.368 0.290 0.229 0.182 0.163 0.145 0.116 0.093 0.075 0.061 0.0550.933 0.870 0.758 0.577 0.505 0.442 0.340 0.263 0.205 0.160 0.141 0.125 0.099 0.078 0.062 0.049 0.0440.928 0.861 0.743 0.555 0.481 0.417 0.315 0.239 0.183 0.140 0.123 0.108 0.084 0.065 0.051 0.040 0.0350.168 0.123 0.091 0.0680.0250.942 0.8870.0130.033 0.0200.025 0.015 0.0090.020 0.011 0.006▬▬▬▬▬▬▬▬0.018

Present value refers to the method of capital budgeting used for estimating the current value of…

Answered: Grove Media plans to acquire production…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

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).

Exhibit A.9
Present Value of an Annuity of $1
Year 1/2%
1
2
0.995
1.985 1.970
2.970
3.950
4.926
5.896
6.862
7.823
8.779
10
9.730
11 10.677
12
13
14
15
3
4
5
25%
30% 35% 40%
1% 2%
0.990 0.980
1.942
2.941 2.884
3.902 3.808
4.853 4.713
5.795 5.601
6.728 6.472
4% 5% 6% 8% 10% 12% 14% 15% 16% 18% 20% 22%
24%
0.962 0.952
0.943
0.926 0.909 0.893 0.877 0.870 0.862 0.847 0.833 0.820
0.806 0.800 0.769 0.741 0.714
1.886 1.859 1.833 1.783 1.736 1.690 1.647 1.626 1.605 1.566 1.528 1.492 1.457 1.440 1.361 1.289 1.224
2.775 2.723 2.673 2.577 2.487 2.402 2.322 2.283 2.246 2.174 2.106 2.042 1.981 1.952 1.816 1.696 1.589
3.630 3.546 3.465 3.312 3.170 3.037 2.914 2.855 2.798 2.690 2.589 2.494 2.404 2.362 2.166 1.997 1.849
4.452 4.329 4.212 3.993 3.791 3.605 3.433 3.352 3.274 3.127 2.991 2.864 2.745 2.689 2.436 2.220 2.035
5.242 5.076 4.917 4.623 4.355 4.111 3.889 3.784 3.685 3.498 3.326 3.167 3.020 2.951 2.643 2.385 2.168
6.002 5.786 5.582 5.206 4.868 4.564 4.288 4.160 4.039 3.812 3.605 3.416 3.242 3.161 2.802 2.508 2.263
6.733 6.463 6.210 5.747 5.335 4.968 4.639 4.487 4.344 4.078 3.837 3.619 3.421 3.329 2.925 2.598 2.331
7.435 7.108 6.802 6.247 5.759 5.328 4.946 4.772 4.607 4.303 4.031 3.786 3.566 3.463 3.019 2.665 2.379
7.722
6.145 5.650 5.216 5.019 4.833 4.494 4.192 3.923 3.682 3.571 3.092 2.715 2.414
8.306
6.495
5.938 5.453 5.234 5.029 4.656
4.327 4.035 3.776 3.656 3.147 2.752 2.438
9.385 8.863 8.384
6.814 6.194 5.660 5.421 5.197 4.793 4.439 4.127 3.851 3.725 3.190 2.779 2.456
7.103 6.424 5.842 5.583 5.342 4.910 4.533 4.203
3.780 3.223
6.002
6.811 6.142
7.652
7.325
8.566
8.162
9.471
8.983
8.111
10.368 9.787
8.760
7.360 6.710
7.887 7.139
7.536
11.619 11.255 10.575
12.556 12.134 11.348 9.986
9.394 8.853
7.904
3.912
2.799
2.469
9.899 9.295
8.244
7.367
6.628
5.724 5.468 5.008
3.962
3.824 3.249
2.814
2.478
13.489 13.004 12.106 10.563
14.417 13.865 12.849 11.118 10.380 9.712 8.559
4.611 4.265
4.675 4.315 4.001 3.859
7.606
5.847 5.575 5.092
3.268
2.825
2.484
6
7
8
9
ان اسلالوار امامات
ahal
Jud
.....
ala-

Exhibit A.8
Present Value of $1
Year 1/2%
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
1%
0.995 0.990
0.990 0.980
0.985 0.971
8% 10% 12% 14% 15% 16% 18% 20% 22% 24% 25% 30% 35% 40%
0.800 0.769 0.741 0.714
0.640 0.592 0.549 0.510
0.512 0.455 0.406 0.364
0.410 0.350 0.301 0.260
0.328 0.269 0.223 0.186
0.262 0.207 0.165 0.133
0.210 0.159 0.122 0.095
0.980 0.961
0.975 0.951 0.906
2% 4% 5% 6%
0.980 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.870 0.862 0.847 0.833 0.820 0.806
0.961 0.925 0.907 0.890 0.857
0.826 0.797 0.769 0.756 0.743 0.718 0.694 0.672 0.650
0.942 0.889 0.864 0.840 0.794 0.751 0.712 0.675 0.658 0.641 0.609 0.579 0.551 0.524
0.924 0.855 0.823 0.792 0.735 0.683 0.636 0.592 0.572 0.552 0.516 0.482 0.451 0.423
0.822 0.784 0.747 0.681 0.621 0.567 0.519 0.497 0.476 0.437 0.402 0.370 0.341
0.971 0.942 0.888 0.790 0.746 0.705 0.630 0.564 0.507 0.456 0.432 0.410 0.370 0.335 0.303 0.275
0.966 0.933 0.871 0.760 0.711 0.665 0.583 0.513 0.452 0.400 0.376 0.354 0.314 0.279 0.249 0.222
0.961 0.923 0.853 0.731 0.677 0.627 0.540 0.467 0.404 0.351 0.327 0.305 0.266 0.233 0.204 0.179
0.956 0.914 0.837 0.703 0.645 0.592 0.500 0.424 0.361 0.308 0.284 0.263 0.225 0.194 0.167 0.144 0.134 0.094 0.067 0.048
0.951 0.905 0.820 0.676 0.614 0.558 0.463 0.386 0.322 0.270 0.247 0.227 0.191 0.162 0.137 0.116 0.107 0.073 0.050 0.035
0.947 0.896 0.804 0.650 0.585 0.527 0.429 0.350 0.287 0.237 0.215 0.195 0.162 0.135 0.112 0.094 0.086 0.056 0.037
0.788 0.625 0.557 0.497 0.397 0.319 0.257 0.208 0.187 0.168 0.137 0.112 0.092 0.076 0.069 0.043 0.027
0.937 0.879 0.773 0.601 0.530 0.469 0.368 0.290 0.229 0.182 0.163 0.145 0.116 0.093 0.075 0.061 0.055
0.933 0.870 0.758 0.577 0.505 0.442 0.340 0.263 0.205 0.160 0.141 0.125 0.099 0.078 0.062 0.049 0.044
0.928 0.861 0.743 0.555 0.481 0.417 0.315 0.239 0.183 0.140 0.123 0.108 0.084 0.065 0.051 0.040 0.035
0.168 0.123 0.091 0.068
0.025
0.942 0.887
0.013
0.033 0.020
0.025 0.015 0.009
0.020 0.011 0.006
▬▬▬▬▬▬▬▬
0.018

Expert Solution

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.