Question

Consider a machine that costs 1,200,000 Baht and is depreciated straight-line to zero over its five-year...

Consider a machine that costs 1,200,000 Baht and is depreciated straight-line to zero over its five-year useful life. If the company is subject to a tax rate of 23 percent, what is the depreciation tax shield?
276,000.00
1,200,000.00
55,200.00
240,000.00

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Homework Answers

Answer #1

> Formula

Depreciation Tax Shield = Depreciation amount * Tax rate

> Calculation

Year Depreciation Tax Shield Calculation Tax Shield
1

= 1200000 / 5

= 240000

240000 * 23%

 55200
2

= 1200000 / 5

= 240000

240000 * 23%

 55200
3

= 1200000 / 5

= 240000

240000 * 23%

 55200
4

= 1200000 / 5

= 240000

240000 * 23%

 55200
5

= 1200000 / 5

= 240000

240000 * 23%

 55200
Total 276000

> Answer

The correct answer is option 1 i.e. 276000

Hope you understand the solution.

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