Assume That an Existing Piece of Equipment of a Firm

question 54

Multiple Choice

Assume that an existing piece of equipment of a firm is being depreciated at $10,000 a year under current tax laws. The firm is considering replacing it with a new machine that will be
Depreciated at $15,000 a year. What will be the annual tax savings on the incremental
Depreciation provided by the new machine if the firm is in a 40% marginal tax bracket?

• A)$3,000
• B)$9,000
• C)$2,000
• D)$6,000

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Definitions:

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