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tax purposes as follows: year 1, $124,000, year 2, $214,000; and in each of years 3 through 5, $94,000 per year. A 10 percent discount rate is appropriate for this asset, and the company's tax Rush Corporation plans to acquire production equipment for $620,000 that will be depreciated for rate is 40 percent. Use Exhibit A& and Exhibit A.9 Required: a. Compute the present value of the tax shield resulting from depreciation. (Round. PVtactorto. 3 decimal places and other intermediate calculations to nearest whole number.) b. Compute the present value of the tax shield from depreciation assuming straight-line depreciation ($124,000 per year) (Round.PVfactorto 3.decimal places and.other intermediate calculations to nearest whole number Lucas Company is considering investing in a new machine. The machine costs $12,000 and has an economic life of four years. The machine will generate cash flows of $3,500 (cash revenues less cash expenses) each year. All cash flows, except for the initial investment, are realized at the end of the year The investment in the machine will be made at the beginning of the first year Lucas is not subject to any taxes and, for financial accounting purposes, will depreciate the machine using straight-line depreciation over four years Lucas uses a 8 percent cost of capital when evaluating investments. UseExhibiA Required: a. Calculate the accounting income for the total over four years b. Compute the NPV of the cash fnows over four years (Round PVfactorto 3 decimal places. Negative amount should be indicated by a minus sign.)

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