Homework #8 (20 Points) 1. 2. 3. 4. (4 points) Your company spent on research and development. Describe the two methods allowed for deducting R&D and show what the related deductions for each method would be over time in years. Assume a full 12 month deduction may be claimed in the first year when appropriate. (4 points) Your corporate mining company spent in mine development costs in time zero. These costs were place on the books in September. Please determine the allowable deductions for this expenditure in each of the next 5 years (0-5). (6 points) Your company just spent on equipment that has been classified as MACRS 7-year property. The half-year convention is considered to be appropriate for both MACRS and SL methods described below beginning with the first deduction to be claimed in year 1 when it is placed into service. Please compute the allowable depreciation for years 1-8 if the equipment is: a. Depreciated using double declining balance switching to straight line. b. Depreciated using the slower straight-line method. c. Depreciated using 100% bonus depreciation. (6 Points) Calculate the present worth (in time zero) of the tax savings generated from the deductions you calculated in part 3 of this homework for a, b, and c. Assume a tax rate of 25% and an i* = 15%.