Your Firm Needs a Computerized Machine Tool Lathe That Costs

Your firm needs a computerized machine tool lathe that costs $50,000, requires $10,000 in installation, $5,000 in freight charges, and another $12,000 in maintenance for each year of its three-year life. After three years, this machine will be replaced. The machine falls into the MACRS three-year class life category. Assume a tax rate of 30 percent and a discount rate of 12 percent. Calculate the depreciation tax shield for this project in year 1.

A) $6,499.35
B) $6,886.00
C) $5,999.40
D) $5,554.40

Correct Answer:

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