Redbird Corporation provides the following data: $$\begin{array} { l r }
\text { Cash inflows } & \$ 50,000 \
\text { Cash outflows } & \$ 43,000 \
\text { Net income } & \$ 35,000 \
\text { Depreciation deduction } & \$ 5,000 \
\text { Accumulated depreciation } & \$ 10,000 \
\text { Tax rate } & 30 \%
\end{array}$$ What is Redbird's tax shield?

Question

Redbird Corporation provides the following data: $$\begin{array} { l r } 
\text { Cash inflows } & \$ 50,000 \
\text { Cash outflows } & \$ 43,000 \
\text { Net income } & \$ 35,000 \
\text { Depreciation deduction } & \$ 5,000 \
\text { Accumulated depreciation } & \$ 10,000 \
\text { Tax rate } & 30 \%
\end{array}$$ What is Redbird's tax shield?

Quizplus · Accepted Answer

The tax shield from depreciation is calculated as the depreciation deduction multiplied by the tax rate. Thus, it's $5,000 * 30\% = $1,500.

Redbird Corporation Provides the Following Data What Is Redbird's Tax Shield? A)$15,000

Redbird Corporation Provides the Following Data What Is Redbird's Tax Shield?
A)$15,000