Trenton Fabrication Company purchased industrial tools costing $110,000, which fall in the 3-year property class under MACRS.

Required:

1. Prepare a schedule of depreciation deductions assuming:

a. The firm uses the accelerated depreciation schedule specified by MACRS.

b. The firm uses the optional straight-line depreciation method and the half-year convention.

2. Calculate the present value of the depreciation tax shield under each depreciation method listed in requirement (1). Trenton Fabrication Company’s after-tax hurdle rate is 12 percent, and the firm’s tax rate is 30 percent.