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Newton Company is considering the purchase of an asset that will provide a depreciation tax shield of $19,200 per year for 10 years. Assuming the company is subject to a 40% tax rate during the period, and a zero salvage value, what is the depreciable cost of the new asset

Respuesta :

Answer:

$480,000

Explanation:

The computation of the depreciable cost of the new asset is shown below:

Given that

Depreciation tax shield = $19,200

Tax rate= 40%

Now  

Actual Depreciation for the year is

= $19,200 ÷ 40%

= $48,000

Now  

Total Depreciation cost for 10 years  is

= $48,000 × 10

= $480,000

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