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Verizon [17]
3 years ago
8

Arsenal Company is considering an investment in equipment costing $30,000 with a five-year life and no salvage value. Arsenal us

es straight-line depreciation and is subject to a 35 percent tax rate. The expected net cash inflow before depreciation and taxes is projected to be $20,000 per year. Over the life of the project, the total tax shield created by depreciation is: Select one: A. $10,750 B. $10,500 C. $20,400 D. $39,600
Business
1 answer:
sammy [17]3 years ago
3 0

Answer:

option (B) $10,500

Explanation:

Data provided in the question:

Cost  = $30,000

Useful life = 5 years

Salvage value = 0

Tax rate = 35%

Expected net cash inflow before depreciation and taxes = $20,000 per year

Now,

The total tax shield created by depreciation over the life of project

= Tax rate × ( Amount of depreciation over the life of project )

= 35% × ( Cost - Salvage value )

= 0.35 × ( $30,000 - 0 )

= $10,500

Hence,

The answer is option (B) $10,500

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3 years ago
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Answer:

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Explanation:

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Public-opinion polls in a small city have revealed that citizens want more resources spent on public safety, an annual fireworks
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Answer:

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