Depreciation that creates tax savings for the company in the amount of the change in depreciation multiplied by the company's marginal tax rate is referred to as the depreciation tax shield.

Question

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The depreciation tax shield refers to the reduction in income taxes that results from taking the allowable depreciation expense as a tax deduction. The tax savings are calculated as the change in depreciation multiplied by the company's marginal tax rate.

Depreciation That Creates Tax Savings for the Company in the Amount