OPTION B: $1,218,424
EXPLANATION:
for year 4
Tax shield under straight-line depreciation method = depreciation x tax rate
= ($65,000,000/7) x 35%
= $9,285,714.2857 x 35%
= $3,250,000
tax shield under MACRS depreciation method = depreciation x tax rate
= ($65,000,000 x 8.93%) x 35%
= $5,804,500 x 35%
= $2,031,576
Therefore depreciation under MACRS method is less than straight-line depreciation by = $3,250,000 - $2,031,576 = $1,218,424
Year 0 14 29% Year 1 24.49% Year 2 17.49% Year 3 12.49% Year 4 8.93%...
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