Jose Construction is considering the purchase of a crane costing $400,000. The expected life is 4 years. The company uses the straight-line method of depreciation with no mid-year convention. The company's tax rate is 34 percent. The present value factors at the company's cost of capital are as follows:
$$\begin{array} { c c }
\underline{\text { Period }} & \underline{\text { Present Value of } \$ 1 @ 12 \%} \
1 & 0.89286 \
2 & 0.79719 \
3 & 0.71178 \
4 & 0.63562 \
5 & 0.56743
\end{array}$$ Required:
Determine the present value of the tax shield under the straight-line method.
Present your answer in good format.

Question

Jose Construction is considering the purchase of a crane costing $400,000. The expected life is 4 years. The company uses the straight-line method of depreciation with no mid-year convention. The company's tax rate is 34 percent. The present value factors at the company's cost of capital are as follows:
 $$\begin{array} { c c } 
\underline{\text { Period }} & \underline{\text { Present Value of } \$ 1 @ 12 \%} \
1 & 0.89286 \
2 & 0.79719 \
3 & 0.71178 \
4 & 0.63562 \
5 & 0.56743
\end{array}$$ Required:
Determine the present value of the tax shield under the straight-line method.
Present your answer in good format.

Quizplus · Accepted Answer

The Answer of Jose Construction is considering the purchase of a crane costing $400,000. The expected life is 4 years. The company uses the straight-line method of depreciation with no mid-year convention. The company's tax rate is 34 percent. The present value factors at the company's cost of capital are as follows:
 $$\begin{array} { c c } 
\underline{\text { Period }} & \underline{\text { Present Value of } \$ 1 @ 12 \%} \
1 & 0.89286 \
2 & 0.79719 \
3 & 0.71178 \
4 & 0.63562 \
5 & 0.56743
\end{array}$$ Required:
Determine the present value of the tax shield under the straight-line method.
Present your answer in good format.

Jose Construction Is Considering the Purchase of a Crane Costing