A Firm Plans to Purchase a $50,000 Asset That Will

question 35

Multiple Choice

A firm plans to purchase a $50,000 asset that will be depreciated straight-line over a 5-year life to a zero salvage value.What is the present value of the resulting depreciation tax shield if the tax rate is 35% and the discount rate is 10%?

• A) $10,866.67
• B) $13,267.75
• C) $17,500.00
• D) $37,908.18

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Definitions:

Null Hypothesis

A hypothesis in statistical inference and hypothesis testing that suggests no significant effect or relationship exists in the data.

Critical Value

A threshold value in hypothesis testing, beyond which we reject the null hypothesis in favor of the alternative hypothesis.

P-Value

A measure in statistical hypothesis testing that helps in determining the significance of the results.

Null Hypothesis

The hypothesis that there is no effect or no difference, serving as the default assumption in hypothesis testing.