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:

Sidewall

The portion of a tire between the tread and bead.

Casing Ply Cord

Casing ply cord is a component of tire construction, made of layers of fabric cords encased in rubber, providing structure and support.

Lead-Acid Wet Cell Battery

A type of rechargeable battery consisting of lead and lead oxide plates, submerged in an electrolyte solution, widely used in automobiles.

Completely Discharged

A state where a battery or capacitive device has released all its stored energy, requiring recharging.