Your Firm Needs a Computerized Machine Tool Lathe That Costs

question 72

Multiple Choice

Your firm needs a computerized machine tool lathe that costs $50,000, requires $10,000 in installation, $5,000 in freight charges, and another $12,000 in maintenance for each year of its three-year life. After three years, this machine will be replaced. The machine falls into the MACRS three-year class life category. Assume a tax rate of 30 percent and a discount rate of 12 percent. Calculate the depreciation tax shield for this project in year 1.

• A)$6,499.35
• B)$6,886.00
• C)$5,999.40
• D)$5,554.40

---

Definitions:

Develop

To bring out the capabilities or possibilities of something; to make more intricate or evolve, especially over time.

Accumulated Degree Hours

A measure used in forensic entomology to estimate the age of a maggot in a corpse, based on the accumulation of hourly temperatures above a threshold.

Larva

The juvenile form of many animals before undergoing metamorphosis, often differing significantly in form and habit from the adult stage.

Develop

To grow or cause to grow and become more mature, advanced, or elaborate.