Triangle Catering Is Considering Investing in New Equipment That Costs

question 73

Multiple Choice

Triangle Catering is considering investing in new equipment that costs $100,000. The equipment would be depreciated using the straight-line method with no half-year convention over five years and have no salvage value. If the company has a 35 percent income tax rate and desires an after-tax rate of return of 15 percent on investments, the total present value of the depreciation tax shield is:

• A) $67,044.
• B) $43,579.
• C) $23,465.
• D) $49,720.

---

Definitions:

Cent

A monetary unit worth one-hundredth of various currencies, including the US dollar and the Euro.

Repeating Decimal

A decimal in which one or more digits repeat infinitely.

Decimal Notation

A system of writing numbers that uses a decimal point to separate the whole number part from the fractional part.

Percent Equivalent

A way of expressing a number as a fraction of 100, denoting it with the symbol "%."