Examlex

Solved

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.


Definitions:

Shift Demand

A change in the quantity demanded at every price level, resulting in the demand curve moving left or right.

Complement

A good or service that is used together with another, where an increase in demand for one leads to an increase in demand for the other.

Substitute

A product or service that can be used in place of another to satisfy similar needs or desires.

Equilibrium

A state in which market supply and demand balance each other, resulting in stable prices and quantities.

Related Questions