The treasurer of New Semiconductor has a problem. The company has just ordered new assembly...
90.2K
Verified Solution
Link Copied!
Question
Accounting
The treasurer of New Semiconductor has a problem. The company has just ordered new assembly robotics for $3,500,000. The manufacturer would install the robotics for an additional $50,000. The treasurer does not know whether the Internal Revenue Service (IRS) will permit the company to treat this installation cost as cost and depreciate the $50,000 along with the cost of the robotics according to the 5-year MACRS tax depreciation schedule: Year 1: 20% Year 2: 32% Year 3:19.2% Year 4: 11.52% Year 5: 11.52% Year 6: 5.76% Assuming the tax rate is 35% and the discount rate is 5%, calculate: 1) the present value of the tax shields if the installation costs are expensed at the end of 1 , and 2) the present value of the tax shields if the installation costs are capitalized and depreciated according to 5-year MACRS. a. PV( Expensed at end of year )=16,677;PV( Depreciated )=15,306 b. PV( Expensed at end of year )=17,500;PV( Depreciated )=17,500 c. PV( Expensed at end of year )=15,324;PV( Depreciated )=14,543 d. PV( Expensed at end of year )=14,345;PV( Depreciated )=12,980
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
