If the tax rate is 40 percent and a company has $800,000 of income, a depreciation deduction of $100,000 would result in a tax savings of

Question

Quizplus · Accepted Answer

The taxable income for the company would be $800,000 - $100,000 = $700,000. 
The tax liability would be 40% of $700,000 = $280,000. 
Without the depreciation deduction, the tax liability would have been 40% of $800,000 = $320,000. 
Therefore, the tax savings would be $320,000 - $280,000 = $40,000.

If the Tax Rate Is 40 Percent and a Company