Your Company Is Considering a New Project That Will Require

question 46

Multiple Choice

Your company is considering a new project that will require $100,000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $25,000 using straight-line depreciation. The cost of capital is 11 percent, and the firm's tax rate is 21 percent. Estimate the present value of the tax benefits from depreciation.

• A) $34,894
• B) $44,169
• C) $9,276
• D) $16,997

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Definitions:

Decision Making

The cognitive process of selecting a course of action from multiple alternatives, typically aimed at achieving a specific goal or solving a problem.

Rationality

A logical, step-by-step approach to decision making, with a thorough analysis of alternatives and their consequences.

Logical Approach

A method of problem solving or decision making that is based on clear, rational, coherent, and systematic principles or steps.

Decision Making

The cognitive process of selecting a course of action from among multiple alternatives.