1. Your company is considering a new project that will require $10,000 of new equipment at the start of the project. The equipment will have a depreciable life of five years and will be depreciated to a book value of $3,000 using straight-line depreciation. The cost of capital is 9 percent, and the firm's tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation.
A. $476
B. $924
C. $1,400
D. $1,851
2. Which statement is true regarding cost-cutting proposals?
A. Cost-cutting proposals main benefits are from changes in sales and changes in costs.
B. Cost-cutting proposals main benefits come only from changes in sales.
C. Cost-cutting proposals main benefits come only from changes in costs.
D. Cost-cutting proposals main benefits come from the change in sales due to the response from the cost-cutting proposal.