A local company is planning for a new project that require an investment in a new machinery. The cost of machinery is $ 20,000. The total expenses to transport and install the machinery will be $ 5,000. Since the machinery uses the latest technology, it will result in a reduction of overall cost by $ 10,000. The company offers free maintenance for the machinery. Savings on account of the free maintenance will be $1,000 every year. The annual contract requires the company to pay $ 1,500 every year for the vendor support. The total life of the project will be four years and it is expected that the machinery can be disposed at the end for $ 2,000 using straight line depreciation approach. The effective tax rate is 12%. Q 26-Based on the above details, the amount of depreciation is:
a. $ 4,375 and it should be added to cash flow after tax
b. $ 4,500 and it should be deducted from cash flow after tax
C.$ 4,375 and it should be deducted from cash flow after tax
d.$ 4,500 and it should be added to cash flow after tax
