Your company is considering a new project that will require $100,000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $25,000 using straight-line depreciation. The cost of capital is 11 percent, and the firm's tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation.

The multiple choices are:

A.$13,607.52

B.$14,841.29

C.$15,017.54

D.$16,997.13

The closest option is C,$15,017.54

Explanation:

The yearly depreciation charge on the new equipment is computed thus:

depreciation charge=cost -salvage value/useful life

cost is $100,000

salvage value is $25,000

useful life is 10 years

depreciation charge=$100,000-$25,000/10

                                 =$75,000/10=$7,500

tax savings =depreciation charge*tax rate

tax rate is 34%

yearly tax savings =$7500*34%=$2550

present value of tax benefits=tax savings*annuity factor(11% for ten years)

annuity factor 11% for 10 years is 5.8892

present value of tax benefits=$2550*5.8892=$15,017.46

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know