What are the tax savings in year 2 from the investment?

Name: What are the tax savings in year 2 from the investment?
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Question

Quizplus · Accepted Answer

The tax savings in year 2 can be calculated as:
Tax savings = (depreciation expense) x (tax rate)
The depreciation expense in year 2 is $72,000 / 20 years = $3,600 per year.
The tax rate is given as 28%, so the tax savings in year 2 = $3,600 x 28% = $1,008.
Over the 5 year period, the total tax savings would be $5,040. Therefore, the best choice is D.

What Are the Tax Savings in Year 2 from the Investment