Your Firm Needs a Computerized Machine Tool Lathe That Costs

question 11

Multiple Choice

Your firm needs a computerized machine tool lathe that costs $50,000, requires $10,000 in installation, 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) $7,199.20
• B) $8,886.00
• C) $4,199.58
• D) $6,554.40

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Definitions:

Mutually Exclusive

Describes two or more events that cannot occur at the same time in a given experiment or situation.

Event A

A generic term used to describe a particular outcome or set of outcomes within a probability space or experiment.

Event B

An occurrence or outcome within a statistical experiment to which a probability can be assigned.

Mutually Exclusive

A characteristic of events that cannot occur at the same time, indicating a clear separation or distinction between them.