Leisure Vacations Is Considering a Project Which Will Require the Purchase

question 57

Multiple Choice

Leisure Vacations is considering a project which will require the purchase of $1.4 million in new 5-Year MACRS equipment.The MACRS rates are 20 percent,32 percent,19.2 percent,11.52 percent,11.52 percent,and 5.76 percent for Years 1 to 6,respectively.Ignore bonus depreciation.The firm desires a minimal 14 percent rate of return and has a combined tax rate of 25 percent.What is the value of the depreciation tax shield in Year 2 of the project?

• A)$107,500
• B)$90,400
• C)$89,600
• D)$123,416
• E)$112,000

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