PRESENT VALUE OF DEPRECIATION TAX SAVINGS The cash flow generated from the deductibility of depreciation (which itself is a noncash expense) is the pr
{"Image DocumentName": "Present value of depreciation tax savings", "Image ImageDescription": "The cash flow generated from the deductibility of depreciation (which itself is a noncash expense) is the product of the tax rate and the depreciation expense. If the depreciation expense is  40 million, the cash flow from this expense is  40 million \u00d7 Tax rate. The present value of these cash flows over the life of the project is the present value of tax savings from depreciation. LOS: Calculate the yearly cash flows of an expansion capital project and a replacement capital project, and evaluate how the choice of depreciation method affects those cash flows. Pages 74\u201377. Present Value of Depreciation Tax Savings. The product of depreciation and the tax rate is often referred to as the depreciation tax shield because it is the amount of tax shielded by the deductibility of the noncash expense of depreciation. The present value of the depreciation tax savings is the value added from permitting depreciation. Copyright \u00a9 2013 CFA Institute.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}