compute the depreciation tax shield based on the following information: depreciation expense $40,000; net profit before...
compute the depreciation tax shield based on the following information: depreciation expense $40,000; net profit before depreciation expense $60,000; tax rate 20%
Homework Answers
depreciation is non-cash expense, but it is shown as expense in Income statement. So depreciation reduces taxable income and thereby reducing tax liability. Depreciation tax shield implies how much tax can be saved due to depreciation shown as an expense.
Depreciation tax shield = Amount of depreciation x tax rate = 40000 x 20% = 8000
Answer : $ 8000. (Thumbs up please)
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compute the depreciation tax shield based on the following
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