Use the Following Information to Answer the Question(s)below

question 52

Multiple Choice

Use the following information to answer the question(s) below.
(Include the MACRS Table from the Appendix. )
Casa Grande Farms is considering purchasing multiple tractors for a total purchase price of $540,000.These tractors are expected to generate EBITDA of $250,000 for each of the next three years.Casa Grande Farms has a 35% tax rate and has a cost of capital of 10%.
-Assuming that Casa Grande Farms depreciates these tractors straight line over the three year life,then the annual depreciation tax shield in year 2 is closest to:

• A)63,000
• B)80,000
• C)84,000
• D)117,000

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Definitions:

Tips

Gratuity given voluntarily by customers in exchange for a service, often subject to specific reporting and taxation rules.

Preparer Tax Identification Number

A unique identification number that all paid tax return preparers must use on U.S. federal tax returns or claims for tax refunds submitted to the IRS.

Marginal Tax Rate

The rate at which the last dollar of a taxpayer's income is taxed, indicating the rate of tax applied to your highest level of income.

Federal Tax Legislation

Laws passed by the United States Congress that relate to taxes imposed by the federal government.