Question
Same info as in previous problem: You are evaluating the proposed acquisition of a new truck. The truck's basic price is $90,000. It costs an
Same info as in previous problem: You are evaluating the proposed acquisition of a new truck. The truck's basic price is $90,000. It costs an additional $10,000 to be installed. The truck falls into the MACRS three year class, and it will be sold after three years for $15,000. In year zero, the truck requires an investment of $5,000 in working capital. The truck will have no effect on revenues, but it is expected to save the firm $40,000 per year in before tax operating costs, mainly labor. The firm's marginal tax rate is 40 percent and the MACRS Depreciation rates are: 33%; 45%; 15%; and 7% for yrs. 1, 2, 3 and 4, respectively.
Qt. 2: What is the depreciation tax shield in year 2? Group of answer choices $27,000 $18,000 $11,800 $17,820
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started