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The treasurer of New Semiconductor has a problem. The company has just ordered new assembly...

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Accounting

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The treasurer of New Semiconductor has a problem. The company has just ordered new assembly robotics for $3,500,000. The manufacturer would install the robotics for an additional $50,000. The treasurer does not know whether the Internal Revenue Service (IRS) will permit the company to treat this installation cost as cost and depreciate the $50,000 along with the cost of the robotics according to the 5-year MACRS tax depreciation schedule: Year 1: 20% Year 2: 32% Year 3:19.2% Year 4: 11.52% Year 5: 11.52% Year 6: 5.76% Assuming the tax rate is 35% and the discount rate is 5%, calculate: 1) the present value of the tax shields if the installation costs are expensed at the end of 1 , and 2) the present value of the tax shields if the installation costs are capitalized and depreciated according to 5-year MACRS. a. PV( Expensed at end of year )=16,677;PV( Depreciated )=15,306 b. PV( Expensed at end of year )=17,500;PV( Depreciated )=17,500 c. PV( Expensed at end of year )=15,324;PV( Depreciated )=14,543 d. PV( Expensed at end of year )=14,345;PV( Depreciated )=12,980

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