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19 January, 18:46

Redbird Corporation provides the following dа ta: Cash inflows $50,000 Cash outflows $43,000 Net income $35,000 Depreciation deduction $ 5,000 Accumulated depreciation $10,000 Tax rate 30% What is Redbird's tax shield?

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  1. 19 January, 20:37
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    The correct answer to the following question is $1500.

    Explanation:

    Tax shield can be defined as the deductions which are allowed on the taxable income, which would ultimately lead to decrease in the taxes paid to the government.

    Given information -

    Cash inflow - $50,000

    Cash outflow - $43,000

    Net income - $35,000

    Depreciation deduction - $5000

    Accumulated depreciation - $10,000

    tax rate - 30%

    For taking out the tax shield - Sum of taxable deduction x Tax rate

    Depreciation expense x tax rate

    = $5000 x 30%

    = $1500
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