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A firm is considering adding a new product line that is expected to increase annual sales by $418,000 and cash expenses by $337,000. The initial
A firm is considering adding a new product line that is expected to increase annual sales by $418,000 and cash expenses by $337,000. The initial investment will require $400,000 in fixed assets that will be depreciated using the straight-line method to a zero-book value over the five-year life of the project. Ignore bonus depreciation. The company has a marginal tax rate of 21 percent. What is the annual value of the depreciation tax shield? \begin{tabular}{l|l} $13,650 \\ $13,160 \\ $16,800 \\ $163,800 \\ $136,500 \end{tabular}
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