A Machine Costs $3 Million and Has Zero Salvage Value

question 52

Multiple Choice

A machine costs $3 million and has zero salvage value.Assume a discount rate of 10% and a 40% tax rate.The machine is depreciated straight-line over 3 years for tax purpose.What is the present value of depreciation tax savings associated with this machine?

• A) $1,200,000
• B) $994,741
• C) $1,090,900
• D) $400,000

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Definitions:

Acquires

Acquires pertains to obtaining ownership or control of something, often referring to companies taking over other businesses.

Manufacturer

A company or individual engaged in the production of goods for sale using raw materials and components.

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A frozen dessert made with yogurt and sometimes other dairy products, often served as an alternative to ice cream.

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Materials such as paints, brushes, canvases, and other items used for creating artwork.