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Souza Corporation Corporation is considering an investment in equipment for $75,000 with a four-year life and no salvage value. Souza uses the straight-line method of depreciation and is subject to a 35 percent tax rate.
Over the life of the project, the total tax shield created by depreciation is:

Answer :

Answer:

$26,250

Explanation:

The computation of the total tax shield created by depreciation is shown below:

= Investment in equipment × tax rate

= $75,000 × 35%

= $26,250

We simply multiplied the investment in equipment and the tax rate so that total tax could be computed. Hence, we consider all the items which are mentioned in the question

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