Val's Pizzeria Is Contemplating the Acquisition of Some New Commercial

question 18

Multiple Choice

Val's Pizzeria is contemplating the acquisition of some new commercial ovens.The purchase price is $39,000.The equipment will be depreciated based on MACRS depreciation which allows for 33.33 percent,44.44 percent,14.82 percent,and 7.41 percent depreciation over years 1 to 4,respectively.The equipment will be worthless at the end of 4 years.The equipment can be leased for $12,500 a year.The firm can borrow money at 8 percent and has a 35 percent tax rate.What is the amount of the depreciation tax shield in year 3?

• A)$1,525.27
• B)$1,624.50
• C)$2,022.93
• D)$2,325.00
• E)$2,631.60

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Definitions:

Early Treatments

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