Minjie has a project that has sales of 630000 costs of 28000

Minjie has a project that has sales of $630,000, costs of $280,000, depreciation of $60,000 each year, interest expense of $3,062, and a tax rate of 40 percent. What is the depreciation tax shield?   Also, please show how to entering numbers in financial calculator HP bII+

Solution

Depreciation shield is simply the multiplication of Tax rate and the Depreciation amount.

Depreciation shield is the saving of tax due to depriciattion.

because we can use deprecation as an expense which can be deducted from the revenue.

For this question the depreciation shield is 60000×.40 = 24000

In the calculator you need to put depreciation amount and multiply it with tax rate.

Good luck!??