Answer (C) is correct . Tax law allows taxpayers to ignore salvage value when calculating depreciation under MACRS. Thus, the depreciation deduction is 7% of the initial
Answer (A) is incorrect because A tax savings will result in the fourth year from the MACRS deduction.
Answer (B) is incorrect because The amount of $17,920 is based on a depreciation calculation in which salvage value is subtracted from the initial cost.
Answer (D) is incorrect because The appropriate discount factor for the fourth period is 0.64, not 0.80.
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The discounted cash flow for the fourth year MACRS depreciation on the new asset is
