### What is the annual value of the depreciation tax shield

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The Lumber Yard is considering adding a new product line that is expected to increase annual sales by \$238,000 and cash expenses by \$184,000. The initial investment will require \$96,000 in fixed assets that will be depreciated using the straight-line method to a zero book value over the 6-year life of the project. The company has a marginal tax rate of 32 percent. What is the annual value of the depreciation tax shield?

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