You are considering adding a microbrewery onto one of your firm's existing restaurants. This will entail an investment of $47,000 in new equipment. This equipment will be depreciated straight-line over five years. If your firm's marginal corporate tax rate is 35%, then what is the value of the microbrewery's depreciation tax shield in the first year of operation?
A) $3290
B) $16,450
C) $6110
D) $30,550

Question

Quizplus · Accepted Answer

A) First figure out the straight-line depreciation.
$47,000 / 5 years = $9400 depreciation per year.
Then 0.35 × $9400 = $3290 depreciation tax shield per year.

You Are Considering Adding a Microbrewery onto One of Your