The Corner Grill Needs a New Refrigeration Unit Which Costs

The Corner Grill needs a new refrigeration unit which costs $28,000. The unit has a 4-year life after which time it will be worthless. The unit belongs in a 20 percent CCA class. The equipment can be leased for $8,300 a year. The firm can borrow money at 8.5 percent and has a 34 percent tax rate. What is the amount of the depreciation tax shield in year 3?

A) $503
B) $538
C) $963
D) $1,319
E) $1,371