Homework Answers
Tax savings from depreciation are computed by
Depreciation*t where t is tax rate
Explanation:
Normally depreciation saves our taxable income, if we have higher depreciation expense we can reduce our taxable income.
Example: If company has depreciation expense of 50,000 and tax rate is 30%, then tax savings from depreciation is
Depreciation*tax rate
=50,000*30%
=15,000
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