The cost of equipment is $84,000; the useful life is 6 years. Salvage value is zero and the cost of capital = 10% and the tax rate = 30%.

The cost of equipment is $84,000; the useful life is 6 years. Salvage value is zero and the cost of capital = 10% and the tax rate = 30%. The present value of the tax savings resulting from the double-declining balance method of depreciation is approximately:

a) $22,988

b) $76,626

c) $25,200

d) 18,420

Refer to the preceding question. It would be reasonable to expect that the present value of the tax savings resulting from the use of the straight line method of depreciation is:

a) more than the preceding result

b) less than the preceding result

c) equal to the preceding result

d) not related to the preceding result