For a profitable firm in the 35 percent marginal tax bracket with $100,000 of annual depreciation expense, the depreciation tax shield would be:

Question

Quizplus · Accepted Answer

The depreciation tax shield is calculated as the depreciation expense multiplied by the firm's marginal tax rate. Therefore, for a $100,000 depreciation expense at a 35 percent tax rate, the tax shield is $100,000 * 0.35 = $35,000.

For a Profitable Firm in the 35 Percent Marginal Tax