When determining the present value of the tax shield for assets being replaced rather than bought new,the calculation must reflect the cash flow difference (incremental cash flow) generated by the new and old assets.

Question

Quizplus · Accepted Answer

It is true that when determining the present value of the tax shield for assets being replaced rather than bought new, the calculation must reflect the incremental cash flow generated by the new and old assets. This is because the tax shield is based on the depreciation of the assets, which is affected by the difference in their cash flows.

When Determining the Present Value of the Tax Shield for Assets