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it will directly reduce our tax payment.
Depreciation is an accounting procedure that gradually reduces the cost of assets. Intially Your Cash flows of company will decline but not the profit, But indirectly we will traet as investing in an assets and we will verify it is feasible or not.Depreciation on assets will reduce our profit, due to same amount payable in the form of Current tax will be decreased.
also I want to add and make sure for an important thing to remember that the difference between the depreciation method which use by company like straight line method and tax authority method like decline method and assets services years also different at most of time some the effect on profit will be reduce but not with the same effect as per the two example methods so we have to take care when we calculate tax shield on feasibility studies
