Peter Pontificator Is Proposing to Purchase a Paddle Machine, Which

Multiple Choice

Peter Pontificator is proposing to purchase a paddle machine, which will cost $1 million, last eight years and have a salvage value of 20%. Given a tax rate of 35%, and a cost of capital of 6%: If double-declining balance depreciation is used, and PP switches to straight-line depreciation in year 6, the present value of the depreciation tax shield is:

A) $287,506
B) $230,005
C) $286,513
D) $229,211
E) none of the above