ACCOUNTING-What is the effect on net income of a $10 increase in depreciation

ACCOUNTING-What is the effect on net income of a $10 increase in depreciation

ACCOUNTING-What is the effect on net income of a $10 increase in depreciation

What is the effect on net income of a $10 increase in depreciation, assuming a 40% tax rate?answer:- Since operating expenses went up by$10, operating income and pre-tax income both decrease by $10.- Assuming a 40% tax rate, Net Income decreases by $6.The question I have is: can you explain how the tax rate reduces the expense by $4? I thought that tax always increases your expense

 

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