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How to calculate Depreciation tax shield

The Depreciation tax shield formula, with plain worked examples you can check yourself.

Depreciation tax shield = D × t

Worked examples

D = 6000 · t = 25%Depreciation tax shield = 1,500
D = 3000 · t = 40%Depreciation tax shield = 1,200
D = 6000 · t = 40%Depreciation tax shield = 2,400

How to use it

  1. Write down the values for each letter in the formula.
  2. Do the brackets first, then divide or multiply.
  3. Check the units before you compare results.
  4. Compare the answer with last period or with a competitor to see if it is good or bad.

This formula belongs to Profit & Margins.

Related terms

DepreciationRevenueGross marginNet incomeEBITDAOperating profit

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