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:

FIFO Method

An inventory valuation method where the first items purchased are the first ones to be sold, standing for "First In, First Out."

Ending Inventory

The total value of goods available for sale at the end of an accounting period, after accounting for purchases and sales.

Brown Bears

Brown bears are large bear species found across various parts of northern Eurasia and North America, known scientifically as Ursus arctos.

Beginning Inventory

The amount of inventory that a business has on hand at the start of an accounting period.