Your firm needs a machine which costs $20,000, and requires $1,000 in maintenance for each year of its three-year life. After three years, this machine will be replaced. The machine falls into the MACRS three-year class life category. Assume a tax rate of 21 percent and a discount rate of 9 percent. What is the depreciation tax shield for this project in year 3?
A. $1,777.20
B. $2,339.98
C. $622.02
D. $3,640.00
Answer: C
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