Question

A company purchases an asset that costs $10,000. This asset qualifies as 3-year property under MACRS. The company uses an after-tax discount rate of 12% and faces a 40% income tax rate. (a) Use the appropriate present value factors found in Appendix C, Table 1, to determine the present value of the depreciation deductions for this firm over the specified 4-year period. Refer to Exhibit 12.4. (Round "MACRS %" to 2 decimal places (i.e, 0.1234 = 12.34%), "PV factor" to 3 decimal places. Round your answers to the nearest whole dollar amount.)

Answer is complete but not entirely correct.***PLEASE HELP WITH PRESENT VALUES, EVERYTHING ELSE IS CORRECT***

Year	Depreciation Deduction	Tax Savings	Present Values
1	$3,333selected answer correct	$1,333selected answer correct	$2,982selected answer incorrect
2	4,445selected answer correct	1,778selected answer correct	3,543selected answer incorrect
3	1,481selected answer correct	592selected answer correct	1,054selected answer incorrect
4	741selected answer correct	296selected answer correct	471selected answer incorrect
	$10,000	$3,999	$8,050

Answer 1

Answer :

Year	Depreciation deduction	Tax Savings	Present values
1	3333	1333	2976
2	4445	1778	3543
3	1481	592	1054
4	741	296	471
	10000	3999	8044

Calculation :

(1)

Year	Cost of Asset	MACRS Depreciation Rates	Depreciation Deduction	Tax Rate	Tax Saving
1	10000	33.33%	3333	40%	1333.2
2	10000	44.45%	4445	40%	1778
3	10000	14.81%	1481	40%	592.4
4	10000	7.41%	741	40%	296.4

(2).

Depreciation Deduction	Present value factor @ 12%	Present value
3333	0.893	2976.369
4445	0.797	3542.665
1481	0.712	1054.472
741	0.635	470.535