When undertaking a capital budgeting problem with taxes,the total cash effect of depreciation expense on a long-term asset is equal to ________.
A) $0
B) depreciation expense times the tax rate
C) depreciation expense times (1 minus the tax rate)
D) depreciation expense divided by the tax rate

Question

Quizplus · Accepted Answer

Depreciation expense reduces taxable income, so the cash effect is the tax savings from the depreciation expense, which is calculated as the depreciation expense times the tax rate.

When Undertaking a Capital Budgeting Problem with Taxes,the Total Cash