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    Present value of depreciation tax shield

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    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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    Solution Preview

    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.