Use the Following Information to Answer the Question(s)below

question 38

Multiple Choice

Use the following information to answer the question(s) below.
(Include the MACRS Table from the Appendix. )
Casa Grande Farms is considering purchasing multiple tractors for a total purchase price of $540,000.These tractors are expected to generate EBITDA of $250,000 for each of the next three years.Casa Grande Farms has a 21% tax rate and has a cost of capital of 10%.
-Assuming that Casa Grande Farms depreciates these tractors straight line over the three-year life,then the annual depreciation tax shield in year 2 is closest to:

• A)$37,800.
• B)$80,000.
• C)$84,000.
• D)$117,000.

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