If depreciation is $600,000 and the marginal tax rate is 21 percent, then the tax shield due to depreciation is
A)$126,000.
B)$600,000.
C)$390,000.
D)The answer cannot be determined from the information given.

Question

Quizplus · Accepted Answer

The tax shield due to depreciation is the amount of tax saved due to the tax deduction of depreciation. To calculate this, we multiply the depreciation amount by the marginal tax rate. Therefore, tax shield due to depreciation = $600,000 x 21% = $126,000. Hence, option A is the correct answer.

If Depreciation Is $600,000 and the Marginal Tax Rate Is