A project has sales of $49,000, costs of $38,000, depreciation of $6,000, interest expense of $300, and a tax rate of 30 percent. What is the value of the depreciation tax shield? a. $1,800. b. $1,500. c. $4,500. d. $4,200. e. $1,645.

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 16EA: Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in...
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A project has sales of $49,000, costs of $38,000,
depreciation of $6,000, interest expense of $300,
and a tax rate of 30 percent. What is the value of the
depreciation tax shield?
a. $1,800.
b. $1,500.
c. $4,500.
d. $4,200.
e. $1,645.
Transcribed Image Text:A project has sales of $49,000, costs of $38,000, depreciation of $6,000, interest expense of $300, and a tax rate of 30 percent. What is the value of the depreciation tax shield? a. $1,800. b. $1,500. c. $4,500. d. $4,200. e. $1,645.
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