Jamestown Industries Is Contemplating the Acquisition of Some New Equipment

question 138

Multiple Choice

Jamestown Industries is contemplating the acquisition of some new equipment. The purchase price is $40,000. The equipment has a 4-year life after which time it will be worthless. The equipment
Belongs in a 35 percent CCA class. The equipment can be leased for $11,000 a year. The firm can
Borrow money at 7 percent and has a 35 percent tax rate. What is the amount of the depreciation
Tax shield in year 4?

• A) $1,708
• B) $2,075
• C) $2,400
• D) $2,964
• E) $3,112