Val's Pizzeria is contemplating leasing versus buying some new ovens costing $28,000, which would be depreciated using the MACRS rates of 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent over Years 1 to 4, respectively. The ovens can be leased for $12,500 a year. The firm can borrow money at 8 percent and has a tax rate of 21 percent. What is the amount of the depreciation tax shield in Year 2?

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The Answer of Val's Pizzeria is contemplating leasing versus buying some new ovens costing $28,000, which would be depreciated using the MACRS rates of 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent over Years 1 to 4, respectively. The ovens can be leased for $12,500 a year. The firm can borrow money at 8 percent and has a tax rate of 21 percent. What is the amount of the depreciation tax shield in Year 2?

Val's Pizzeria Is Contemplating Leasing Versus Buying Some New Ovens