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Accounting for Decision Making and Control 7th Edition by Jerold Zimmerman
Edition 7ISBN: 978-0078136726Accounting for Decision Making and Control 7th Edition by Jerold Zimmerman
Edition 7ISBN: 978-0078136726 Exercise 23
Depreciation Tax Shield
An investment project involves the purchase of equipment at a cost of $100 million. For tax purposes, the equipment has a life of five years and will be depreciated on a straight-line basis. Inflation is expected to be 5 percent and the real interest rate is 5 percent. The tax rate is 40 percent. What is the present value of the depreciation tax shield for the machine?
Source: R. Watts.
An investment project involves the purchase of equipment at a cost of $100 million. For tax purposes, the equipment has a life of five years and will be depreciated on a straight-line basis. Inflation is expected to be 5 percent and the real interest rate is 5 percent. The tax rate is 40 percent. What is the present value of the depreciation tax shield for the machine?
Source: R. Watts.
Explanation
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Conceptual background
Depreciation Tax ...
Accounting for Decision Making and Control 7th Edition by Jerold Zimmerman
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