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:

Predictor Variable

A variable that is used in statistical models to forecast or predict the outcome of a dependent variable.

Regression Formula

An equation that describes the statistical relationship between one or more predictor variables and the response variable.

Slope

The measure of the steepness or incline of a line, defined as the ratio of the vertical change to the horizontal change between two points on the line.

Regression Formula

A mathematical equation used in statistical analysis to predict the value of a dependent variable based on the value(s) of one or more independent variables.