Suppose That You Are Able to Generate an Annual Depreciation

Multiple Choice

Suppose that you are able to generate an annual depreciation deduction of $20,000 that would otherwise have been taxed at a 30% rate each year for 7 years. Suppose that your taxes due on sale in year 7 will be $32,000 greater than if the property had not been depreciated. Determine the net benefit of depreciation assuming a discount rate of 6.5%.

A) $12,315
B) $20,592
C) $32,907
D) $53,499