The tax benefit to the firm from the writeoff on this asset is equal to? what?
When you dispose of an asset which has a remaining undepreciated book value then you will end up recording a loss on the disposal of the asset.
This loss will reduce your overall profits on your profit and loss statement, but it doesn't actually cost the company any cash so it is a paper loss.
The firm benefits because this loss will offset profits, reducing their overall profits and subsequently their overall tax bill. The tax benefit is calculated by multiplying the amount of the loss by the marginal tax rate.
Source(s):
Senior financial controller
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