Your Company Is Considering a New Project That Will Require

question 15

Multiple Choice

Your company is considering a new project that will require $2,000,000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $250,000 using straight-line depreciation. The cost of capital is 12 percent, and the firm's tax rate is 39 percent. Estimate the present value of the tax benefits from depreciation.

• A)$68,250
• B)$106,750
• C)$175,000
• D)$385,628

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