Val\'s Pizzeria is contemplating the acquisition of some new commercial ovens. T

Question

Val's Pizzeria is contemplating the acquisition of some new commercial ovens. The purchase is $38,000. The equipment will be depreciated based on MACRS depreciation which allows for 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent depreciation over years 1-4, respectively. The equipment will be worthless at the end of 4 years. The equipment can be leased for $12,500 a year. The firm can borrow at 8 percent and has a 35 percent tax rate. What is the amount of the depreciation tax shield in a 3 years? a. $1,525.27 b. $1.624.50 c. $1,971.06 d. $2, 325.00 e. $2,631.60

Explanation / Answer

Year Depreciation Depreciation tax shield @35% 3 $      5,631.60 $                                          1,971.06 38000*0.1482

Related Questions

Navigate

• Browse (All)
• Browse V
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.