Hogvertz Elvin Catering (HEC) is considering switching from its old food maker to a new Wonder Food

Question:

Hogvertz Elvin Catering (HEC) is considering switching from its old food maker to a new Wonder Food Maker. Both food makers will remain useful for the next 10 years, but the new food maker will generate a depreciation expense of $5,000 per year, while the old food maker will generate a depreciation expense of $4,000 per year. What is the after-tax effect from depreciation of switching to the new food maker for HEC if the firm’s marginal tax rate is 40 percent and the is 12 percent?

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