Carl William, Inc. is a conservatively managed boat company whose motto isThe old ways are the good ways. Management has always used straightline depreciation for tax and external reporting purposes. Although they are reluctant to change, they are aware of the impact of taxes on a projects profitability.

Required

For a typical $ investment in equipment with a fiveyear life and no salvage value, determine the present value of the advantage resulting from the use of doubledeclining balance depreciation as opposed to straightline depreciation. Assume an income tax rate of and a discount rate of Also assume that there will be a switch from doubledeclining balance to straightline depreciation in the fourth year.

Note: Round your answers below to the nearest whole dollar.

Present value of doubledeclining balance tax shield Answer

Present value of straightline tax shield Answer

Advantage of doubledeclining balance depreciation Answer