Ms. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered...

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Ms. T. Potts, the treasurer of Ideal China, has a problem. Thecompany has just ordered a new kiln for $420,000. Of this sum,$52,000 is described by the supplier as an installation cost. Ms.Potts does not know whether the Internal Revenue Service (IRS) willpermit the company to treat this cost as a tax-deductible currentexpense or as a capital investment. In the latter case, the companycould depreciate the $52,000 using the five-year MACRS taxdepreciation schedule.
Assume the tax rate is 30% and the opportunity cost of capitalis 7%. Calculate the value of the tax shield if the kiln iscurrently expensed and if it is treated as a capital investment.(Do not round intermediate calculations. Round your answersto the nearest whole dollar amount.)
Tax shield ifcurrently expensed $
Tax shield ifcapital investment $

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Calculation of Persent Value of Tax shield if currently expensed Present Value of Tax shield if currently expensed Total Installation cost x Tax rate x Discount factor 7 for Year 1 Present Value of See Answer

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Ms. T. Potts, the treasurer of Ideal China, has a problem. Thecompany has just ordered a new kiln for $420,000. Of this sum,$52,000 is described by the supplier as an installation cost. Ms.Potts does not know whether the Internal Revenue Service (IRS) willpermit the company to treat this cost as a tax-deductible currentexpense or as a capital investment. In the latter case, the companycould depreciate the $52,000 using the five-year MACRS taxdepreciation schedule.Assume the tax rate is 30% and the opportunity cost of capitalis 7%. Calculate the value of the tax shield if the kiln iscurrently expensed and if it is treated as a capital investment.(Do not round intermediate calculations. Round your answersto the nearest whole dollar amount.)Tax shield ifcurrently expensed$Tax shield ifcapital investment$


Tax shield ifcurrently expensed	$
Tax shield ifcapital investment	$