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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.

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

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Depreciation tax shield is the savings in tax due to depreciation. It is calculated as depreciation amount X tax ...

Solution Summary

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