Present value of depreciation tax shield

Strauss Corporation is making a $60,000 investment
in equipment with a five-year life.The company uses the straight-line method of depreciation and has a tax rate of 40 percent.The company's required rate of return is 12 percent.

Required
What is the present value of the tax savings related to depreciation of the equipment?

Solution Summary

The solution explains how to calculate the present value of depreciation tax shield