Suppose a Machine That Costs $80,000 Has a Useful Life

question 13

Multiple Choice

Suppose a machine that costs $80,000 has a useful life of 10 years. Also suppose that depreciation on the machine is $8,000 for tax purposes in year 4. The tax rate is 40%. The tax savings from the depreciation tax shield in year 4 would be:

• A) $4,800 inflow
• B) $3,200 inflow
• C) $4,800 outflow
• D) $3,200 outflow