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.Mrs. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered,a new kiln for $400,000. Of this sum, $50,000 is described by the supplier as an installation,cost. Mrs. Potts does not know whether the Internal Revenue Service (IRS) will permit,the company to treat this cost as a tax-deductible current expense or as a capital,investment. In the latter case, the company could depreciate the $50,000 using the fiveyear,MACRS tax depreciation schedule. How will the IRS’s decision affect the after-tax,cost of the kiln? The tax rate is 35 percent and the opportunity cost of capital is 5 percent.,

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