The Sisyphean Company is considering a new project that will have an annual depreciation expense of $2.5 million.If Sisyphean's marginal corporate tax rate is 40% and its average corporate tax rate is 30%,then what is the value of the depreciation tax shield on the company's new project?
A)$750,000
B)$1,000,000
C)$1,500,000
D)$1,750,000

Question

Quizplus · Accepted Answer

The depreciation tax shield is calculated as the depreciation expense multiplied by the marginal tax rate. Therefore, $2.5 million * 40% = $1,000,000.

The Sisyphean Company Is Considering a New Project That Will