The Sisyphean Company Is Considering a New Project That Will

question 29

Multiple Choice

The Sisyphean Company is considering a new project that will have an annual depreciation expense of $2.5 million.If Sisyphean's marginal corporate tax rate is 40% and their average corporate tax rate is 30%,then what is the value of the depreciation tax shield on their new project?

• A)$750,000
• B)$1,000,000
• C)$1,500,000
• D)$1,750,000

---

Definitions:

Novation

The process of replacing an obligation to perform with a new obligation or replacing a party to an agreement with a new party.

Statutory Assignment

An assignment of rights that an assignee may enforce if certain conditions are met by the assignment.

Equitable Assignment

An assignment that could be enforced if all parties could be brought before the court.

Constructive Trust

An equitable remedy that imposes a trust-like obligation on someone who has wrongfully obtained or holds legal property rights.