Calculate the Present Value of the Depreciation Tax Shield for an Asset

question 114

Essay

Calculate the present value of the depreciation tax shield for an asset with a three-year estimated life costing $100,000.The firm has a 35 percent tax rate and a 10 percent cost of capital.Its CCA is 30 percent declining balance with a half-year rule.Compare this present value to that calculated for straight-line depreciation with no salvage value in both cases.

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