Question

Eglon Mills has a new Year 2020 project with an initial equipment cost of $368,000 and a project life of 10 years. The firm generally uses straight-line depreciation to a zero book value over the project's life. If the firm opts instead to use the bonus depreciation method, what is the depreciation tax shield amount for Year 2020 at a tax rate of 21 percent

Answer 1

Answer:

$77,280

Explanation:

Calculation for what is the depreciation tax shield amount for Year 2020 at a tax rate of 21 percent

Using this formula

Depreciation Tax Shield =Initial equipment cost*tax rate

Let plug in the formula

Depreciation Tax Shield = $368,000*21%

Depreciation Tax Shield = $77,280

Therefore the Depreciation Tax Shield will be $77,280