A. Swenson Foods has sales for the year of $311,000 costs of $220,300, depreciat

Question

A.

Swenson Foods has sales for the year of $311,000 costs of $220,300, depreciation of $42,500, interest paid of $5,900, and a tax rate of 35 percent. What is the amount of the depreciation tax shield?

$20,865

$14,875

$17,145

$14,805

B.

rev: 09_18_2012

$26,718,300

$23,754,000

$24,600,000

$20,028,160

$25,446,000   

Swenson Foods has sales for the year of $311,000 costs of $220,300, depreciation of $42,500, interest paid of $5,900, and a tax rate of 35 percent. What is the amount of the depreciation tax shield?

Explanation / Answer

1: Depreciation tax shield=Depreciation*Tax rate

= 42500*35%= 14875

2: Initial investment=- Cost of plant- grading cost- Cost of land foregone

=-15,200,000-846000- 9400,000

=-25446000

Cash flow amount = 25,446,000

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