A project will produce cash inflows of $5,000 each year for three years. It requires a new piece of equipment costing $9,000 that will have no value after the three years. Taxes are 40 percent. The discount rate is 10 percent.

There are two possible methods of taking depreciation: straight line or accelerated. The straight line depreciation will be $3,000 per year. The accelerated depreciation will be $4,000 the first year; $3,000 the second year; and $2,000 the third year.

What is the Present Value of the project, using accelerated depreciation?

Answer Options

a. $10,508

b. $12,434

c. $3,047

d. $2,984