Depreciation Tax Shield Definition: A reduction in tax that results from depreciation deductions. The reduction in tax is computed by multiplying the depreciation deduction by the tax rate.
Depreciation Tax Shield
Depreciation tax shield is computed as the amount of depreciation multiplied by the tax rate.A means of reducing income tax payments by deducting depreciation from the taxable income this is called Depreciation Tax Shield.
Income Tax and Capital Budgeting Decisions: Learning Objectives: Include income taxes in a capital budgeting analysis. In our discussion of capital budgeting decisions in this chapter, we ignored income taxes for two reasons. First, many organizations do not pay income taxes. Not-for-profit organizations, such