Your Firm Needs a Computerized Machine Tool Lathe Which Costs

question 64

Multiple Choice

Your firm needs a computerized machine tool lathe which costs $50,000, requires $10,000 in installation and another $12,000 in maintenance for each year of its 3-year life. After 3 years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 30% and a discount rate of 12%. Calculate the depreciation tax shield for this project in year 1.

• A) $7,199.20
• B) $8,886.00
• C) $5,999.40
• D) $6,554.40