Arnold Is Acquiring a New Machine with a Life of 5

question 2

Multiple Choice

Arnold is acquiring a new machine with a life of 5 years for use on its production line. The following data relate to this purchase: Cost of new machine$100000Annual cost savings in cash expenses45000Terminal value8000Maintenance required in the 4th year5000Book value of the old machine20000The new machine would replace an old fully-depreciated machine. The old machine can be sold for $15,000 at the time the new equipment is acquired. The income tax rate is 30%, and the discount rate is 12%. Arnold uses the straight-line method for depreciation on all machines (ignore the half-year convention) .
The present value of the total tax savings from the depreciation tax shield is

• A) $21,630.00
• B) $46,432.40
• C) $50,470.00
• D) $19,899.60

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Definitions:

Local Contrast

A change in behavior that occurs following a change in reinforcement contingency; the change in behavior fades with extended training.

Systematic Contrast

A phenomenon in experimental analysis where differences in response are systematically altered to observe differences in outcomes, often used in psychological and behavioral research.

Making Pizzas

The process of preparing and baking pizzas, which involves creating the dough, adding toppings, and cooking in an oven.

Hourly Rate

The amount of compensation or payment received for each hour of work performed.