Southport Company Is Considering the Purchase of a Piece of Equipment

question 29

Multiple Choice

Southport Company is considering the purchase of a piece of equipment that costs $100,000. The equipment would be depreciated on a straight-line basis to its expected salvage value of $10,000 over its 10 years useful life. Assuming a tax rate of 40%, what is the annual amount of the depreciation tax shield provided by this investment?

• A) $4,000
• B) $9,000
• C) $3,600
• D) None of these answers is correct.

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Definitions:

Outcome Fairness

A concept in ethics and law where the focus is on the fairness of the results of a decision or a process, ensuring that all participants receive equitable treatment.

Amicable Discharge

A mutual agreement between an employer and an employee to end employment on good terms.

Employee Engagement

The degree to which employees are fully involved in their work and the strength of their commitment to their job and company.

Competitive Advantage

A unique attribute or ability a company has that enables it to outperform its competitors in the market.