A Firm Invests $10 Million in a New Stamping Machine

question 92

Multiple Choice

A firm invests $10 million in a new stamping machine.It depreciates it straight line for tax purposes over 5 years.The tax rate is 30%,inflation is 4% a year,and the discount rate is 8%.What is the PV of the depreciation tax shield?

• A) $600,000.
• B) $2,395,626.
• C) $2,579,497.
• D) $3,000,000.

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Definitions:

Education

The process of receiving or giving systematic instruction, especially at a school or university, or the knowledge and skills acquired through this process.

Deviant Behavior

Behavior that violates the norms that apply in a given situation.

Secondary Deviance

Deviant behavior employed by a person as a means of defense or adjustment to the problems created by others’ reactions to rule breaking by him or her.

Temper Tantrums

Emotional outbursts, usually seen in children, characterized by yelling, crying, or striking out, due to frustration or inability to express needs.