The Trimark Corporation Is Considering Replacing an Existing Machine That

question 63

Multiple Choice

The Trimark Corporation is considering replacing an existing machine that cost $125,000 three years ago with one that will cost $200,000 today. The existing machine is being depreciated for
Tax purposes over 5 years using straight-line depreciation. The new machine would be
Depreciated over 5 years using straight-line depreciation as well. Trimark pays taxes at a
Marginal rate of 40%. If Trimark buys the new machine, what will be the annual tax savings
From the incremental depreciation for each of the first five years?

• A)$15,000 for the first two years and $40,000 for the last three years
• B)$6,000 for the first two years and $16,000 for the last three years
• C)$6,000 for all five years
• D)$16,000 for all five years

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Definitions:

Increase

A rise in quantity or quality in a given context, such as price, value, or productivity.

Price Elasticity

An index reflecting the degree to which the demand for a product varies with a shift in its cost.

Supply

represents the total amount of a product or service that is available for purchase at any given price in a market.

Price Change

Price change refers to the variation in the cost of goods and services over time.