The calculation of the net present value of an investment project requires that the depreciation tax shield be included at:
A) the amount of the depreciation with no adjustment for taxes.
B) the amount of the depreciation times one minus the tax rate.
C) the amount of the depreciation times the tax rate.
D) zero, since depreciation is not relevant to the calculation of net present value.

Question

Quizplus · Accepted Answer

The depreciation tax shield is calculated as the amount of depreciation times the tax rate, as it represents the tax savings due to depreciation.

The Calculation of the Net Present Value of an Investment