In a Net Present Value Analysis of an Equipment Upgrade

question 16

Multiple Choice

In a net present value analysis of an equipment upgrade using a 30% tax rate, what amount of cash savings would have the same present value as a $168,000 depreciation deduction?

• A) $35,280
• B) $50,400
• C) $72,000
• D) $117,600

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Definitions:

Sunk Costs

Costs that have already been incurred and cannot be recovered or refunded, and thus should not factor into future decision-making processes.

Fixed Costs

Fixed expenditures that are unaffected by changes in production or sales volumes, like rent, wages, and insurance costs.

Marginal Cost

The cost incurred by producing one additional unit of a good or service.

Crafters Fair

An event where artisans and craftspeople showcase and sell their handmade goods, often featuring a variety of unique items.