What is the amount of the annual depreciation tax shield for a firm with $200,000 in net income, $75,000 in depreciation expense and a 35 percent marginal tax rate?
A)$26,250
B)$43,750
C)$70,000
D)$75,000

Question

Quizplus · Accepted Answer

The annual depreciation tax shield is calculated as the depreciation expense multiplied by the marginal tax rate. Therefore, it is $75,000 * 35% = $26,250.

What Is the Amount of the Annual Depreciation Tax Shield