What is the value of the depreciation tax shield where a company purchases equipment for $490,000 and depreciates it for tax purposes over its useful life of 7 years? Company tax rate is 21%.

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Quizplus · Accepted Answer

The depreciation tax shield is calculated as the depreciation expense multiplied by the tax rate. The annual depreciation expense is $490,000 / 7 = $70,000. The tax shield for one year is $70,000 * 21% = $14,700.

What Is the Value of the Depreciation Tax Shield Where