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Accounting

Problem:

The Lumber Yard is considering adding a new product line that is expected to increase annual sales by $238,000 and cash expenses by $184,000. The initial investment will require $96,000 in fixed assets that will be depreciated using the straight-line method to a zero book value over the 6-year life of the project. The company has a marginal tax rate of 32 percent.

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Question: What is the annual value of the depreciation tax shield?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91170218

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