A Firm produces 1,00,000 units and sells at Rs. 10 per unit. The cost of manufacturing is Rs. 6,00,000…
Depreciation is a non-cash tax-deductible expense that reduces taxable income and saves corporate income tax. The Depreciation Tax Shield is calculated as Depreciation * Tax…
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A Firm produces 1,00,000 units and sells at Rs. 10 per unit. The cost of manufacturing is Rs. 6,00,000 per annum and depreciation is Rs. 1,00,000 per annum. The depreciation tax shield will be __________ if the rate of corporate taxation is 30%.
Answer and explanation
Correct answer C
Depreciation is a non-cash tax-deductible expense that reduces taxable income and saves corporate income tax. The Depreciation Tax Shield is calculated as Depreciation * Tax Rate = Rs. 1,00,000 * 30% = Rs. 30,000.
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UGC NET Commerce