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Biggs Industries is considering two alternative ways to depreciate a proposed investment

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Biggs Industries is considering two alternative ways to depreciate a proposed investment. The investment has an initial cost of $100,000 and an expected five-year life. The two alternative depreciation schedules follow:

Assuming that the company faces a marginal tax rate of 40 percent and has a cost of capital of 10 percent, what is the difference between the two methods in the present value of the depreciation tax benefit? Present value tables or a financial calculator are required.

1. 1. 1. $7,196
      2. $0
      3. $2,878
      4. $6,342