Brown Company Is Considering the Purchase of the Following Computer

question 12

Multiple Choice

Brown Company is considering the purchase of the following computer equipment, which is considered 5-year property for tax purposes: Brown Company plans to use MACRS and keep the production equipment for seven years.(Round amounts to dollars.)
Tax savings from depreciation in Year 3 would be

• A) $54,400.
• B) $35,360.
• C) $22,856.
• D) $30,720.

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Definitions:

Marginal Product

The additional output resulting from the use of one more unit of a productive input, holding other inputs constant.

Production Function

An equation that describes the maximum output of a good achieved from a given number of inputs.

Input

The inputs such as labor, materials, or resources utilized in creating products and services.

Convexity

In economics and finance, convexity refers to the shape of the curve that demonstrates how the duration of a bond changes as the interest rate changes.