Which of the following is true of the depreciation tax shield?
A) It increases annually with the rate of inflation.
B) It decreases annually in nominal terms.
C) It is not altered by inflation.
D) The real value of the depreciation is fixed.

Question

Quizplus · Accepted Answer

The depreciation tax shield is not altered by inflation because it is based on a fixed rate determined by tax laws for each type of asset. However, its nominal value decreases annually as the asset is depreciated over its useful life.

Which of the Following Is True of the Depreciation Tax