The Lumber Yard Is Considering Adding a New Product Line

question 13

Multiple Choice

The Lumber Yard is considering adding a new product line that is expected to increase annual sales by $238,000 and cash expenses by $184,000.The initial investment will require $96,000 in fixed assets that will be depreciated using the straight-line method to a zero book value over the 6-year life of the project.The company has a marginal tax rate of 32 percent.What is the annual value of the depreciation tax shield?

• A)$5,120
• B)$13,160
• C)$25,840
• D)$32,560
• E)$41,840

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Definitions:

Imported

Goods or services brought into one country from another, subject to trade regulations and possibly tariffs.

Price

The amount of money or its equivalent required to purchase a product, service, or asset.

Macaroni Salad

A type of salad typically made from cooked macaroni pasta and a variety of other ingredients, mixed in a mayonnaise-based dressing.

Quarts

A unit of liquid volume measurement in the United States, equivalent to a quarter of a gallon or approximately 0.946 liters.