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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Definitions:

Academic Accountability

The responsibility of educators and institutions to ensure that students meet certain educational standards.

Constructivist Classroom

An educational approach that emphasizes active learning, where students build new understandings based on their experiences and prior knowledge.

Facilitator

An individual who makes an action or process easier or more possible, often used in the context of learning or meeting settings.

Constructivist Approach

An educational theory that emphasizes learning as an active, constructive process where learners build new ideas upon their current knowledge.