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Depreciation tax shield and Undertaking Declining Balances

Undertake both a declining balance and straight -line depreciation of an item of capital expenditure of $2 million. The declining balance deprecation rate is 30%,effective tax rate is 45%, cost of capital is 10% and straight -line depreciation rate is 20%.

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Solution Summary

The solution explains the calculation of depreciation tax shield under declining balance and straight line method