Question

If the depreciation is $100,000 and the marginal tax rate is 21 percent, then the tax shield due to depreciation is?

1) $21,000
2) $79,000
3) $100,000
4) $121,000

Answer 1

The tax shield due to $100,000 of depreciation with a 21 percent marginal tax rate is $21,000.

Step-by-step explanation:

The tax shield due to depreciation is calculated by multiplying the depreciation expense by the marginal tax rate. In this case, if the depreciation is $100,000 and the marginal tax rate is 21 percent, the tax shield is 0.21 × $100,000, which is equal to $21,000. Hence, the correct answer is 1) $21,000.