Your Firm Needs a Computerized Machine Tool Lathe That Costs

question 108

Multiple Choice

Your firm needs a computerized machine tool lathe that costs $50,000, requires $10,000 in installation, $5,000 in freight charges, and another $12,000 in maintenance for each year of its three-year life. After three years, this machine will be replaced. The machine falls into the MACRS three-year class life category. Assume a tax rate of 21 percent and a discount rate of 12 percent. Calculate the depreciation tax shield for this project in year 1.

• A) $4,549.55
• B) $6,886.00
• C) $5,999.40
• D) $21,664.50

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