What is the annual value of the depreciation tax shield?

What is the annual value of the depreciation tax shield?

McElroy Carousel Horses is considering adding a new product line that will require an initial invest.  Show more McElroy Carousel Horses is considering adding a new product line that will require an initial investment of $484500 in fixed assets and that will be depreciated using the straight-line method to a zero book value over the 6-year life of the project.

The project is expected to increase annual sales by $338000 and annual cash expenses by $184000.

How do you calculate the present value of the tax benefit of depreciation?

 

The company has a marginal tax rate of 32 percent. What is the annual value of the depreciation tax shield? McElroy Carousel Horses is considering adding a new product line that will require an initial investment of $484500 in fixed assets and that will be depreciated using the straight-line method to a zero book value over the 6-year life of the project.

 

The project is expected to increase annual sales by $338000 and annual cash expenses by $184000. The company has a marginal tax rate of 32 percent. What is the annual value of the depreciation tax shield? $5120 $13160 $25840 $32560 $41840 Show less