1. AA Auto Parts Company has a corporate tax rate of 34 percent and depreciation of $19,180. Compute its depreciation tax shield.
2. Suppose the Quick Towing Company purchases a new tow truck. The old truck had a book value of $1,000 and was sold for $1,420. If
Quick Towing is in the 34 percent marginal tax bracket, what is the tax liability on the sale of the truck? What is the after-tax cash flow on the sale?