Shere Khan Corporation Is Currently Evaluating a New Project

Shere Khan Corporation is currently evaluating a new project.Relatively inexpensive equipment with an estimated cost of $300 000 would be purchased,but shipping costs to move the equipment would total $25 000 and installation charges would add another $15 000 to the total equipment costs.Further,the company's inventories would have to be increased by $20 000 at the time of initial investment.The straight-line depreciation rate is 20% and corporate tax rate is 25%.Calculate the tax effect of depreciation on annual cash flows.

A) $15 000
B) $11 250
C) $18 000
D) $18 750
E) $17 000