Your Firm Needs a Machine Which Costs $500,000, and Requires

question 94

Multiple Choice

Your firm needs a machine which costs $500,000, and requires $10,000 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 15 percent. What is the depreciation tax shield for this project in year 3?

• A) $7,219.88
• B) $24,500.00
• C) $15,550.50
• D) $48,132.50

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Definitions:

International Monetary Fund

An international organization that aims to foster global monetary cooperation, secure financial stability, and facilitate international trade.

Special Reserves

Funds or assets set aside for specific, often unforeseen, needs or requirements.

Floating Exchange Rates

A currency valuation system that allows the value of a currency to fluctuate according to the foreign exchange market.

Pesos

The currency used in several Latin American countries, including Mexico and Colombia, often symbolized by the "$" sign.