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Present value of the depreciation tax shield

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Reference no: EM132048560

Trenton Fabrication Company purchased industrial tools costing $130,000, which fall in the 3-year property class under MACRS.

Calculate the present value of the depreciation tax shield under each depreciation method listed in part (1). Trenton Fabrication Company's after-tax hurdle rate is 8 percent, and the firm's tax rate is 30 percent.

Method 1: The firm uses the accelerated depreciation schedule specified by MACRS

Method 2: The firm uses the optional straight-line depreciation method and the half-year convention.

Reference no: EM132048560

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