A new project with a life of four years will increase sales by $140,000 and cash expenses by $95,000 annually.The project will cost $100,000 and will be depreciated using the Year 2018 bonus depreciation method.The company has a marginal tax rate of 21 percent.What is the value of the depreciation tax shield in Year 2?
A)$0
B)$5,250
C)$2,625
D)$3,375
E)$6,500

Question

Quizplus · Accepted Answer

The Year 2018 bonus depreciation method allows for 100% immediate expensing of the asset in the first year, leaving no depreciation expense in subsequent years. Therefore, the depreciation tax shield in Year 2 is $0.

A New Project with a Life of Four Years Will