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Your firm needs a machine which costs $125,000, and requires $10,000 in maintenance for each year of its 3-year life. After 4 years, this machine

Your firm needs a machine which costs $125,000, and requires $10,000 in maintenance for each year of its 3-year life. After 4 years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 20% and a discount rate of 15%. What is the depreciation tax shield for this project in year 4?

Year 3-Year
1 33.33%
2 44.45%
3 14.81%
4 7.41%

A: $18,512.50

B: $8,332.50

C: $1,852.50

D: $3,702.50

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