National Manufacturing Company is considering buying some new equipment that would allow for increased sales of its product. The incremental impact of the proposed $400,000 investment is shown below using straight-line depreciation and an expected useful life of four years for the equipment. The company has a minimum desired rate of return of 14%.

Revenues $500,000

Nondepreciating expenses $300,000

Depreciation $100,000

Total expenses $400,000

Taxable income $100,000

Income tax (40%) $40,000

Net income $60,000

Question 12: If the investment was allowed to depreciate over a three-year recovery period and the double-declining-balance method of depreciation was used, the present value of the tax savings from depreciation would be _____.

Question 12 options:

$53,274

$66,464

$132,928

$280,000