![Capital Budgeting – Effect of unexpected inflation](https://forum.sseiqforum.com/wp-content/uploads/2021/05/image-8-scaled-260x185.jpg)
Can someone please help me understand how does higher unexpected inflation reduce the value of depreciation tax shelter?
Please briefly explain why you feel this question should be reported.
Please briefly explain why you feel this answer should be reported.
Please briefly explain why you feel this user should be reported.
Depreciation tax savings is a fixed contractual cash flow, i.e. these cash flows are not affected by inflation, so if unexpected inflation happens to be higher, the real value of these cash flows will decrease.