If depreciation increases by 100 with a 25% tax rate, what happens to net income?
- A It decreases by 75
- B It decreases by 100
- C It increases by 25
- D It is unchanged
Answer
It decreases by 75
The pre-tax reduction of 100 is offset by a 25 tax saving, so net income falls by 75 while cash increases by 25.





