What is the annual value of the depreciation tax shield

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McElroy Carousel Horses is considering adding a new product line that will require an initial investment of \$484,500 in fixed assets and that will be depreciated using the straight-line method to a zero book value over the 6-year life of the project. The project is expected to increase annual sales by \$338,000 and annual cash expenses by \$184,000. The company has a marginal tax rate of 32 percent. What is the annual value of the depreciation tax shield?

\$5,120
\$13,160
\$25,840
\$32,560
\$41,840

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