Question

What is the present value of the CCA tax shields generated if a company purchases equipment...

What is the present value of the CCA tax shields generated if a company purchases equipment to be used in business operations for $380,000 and the equipment has a CCA rate of 30 percent? You intend to sell the equipment in year 8 for a salvage value of $8,000. The tax rate is 35 percent and the company uses a 10 percent discount rate. Select one: a. $93,777 b. $91,273 c. $95,216 d. $92,537 e. $94,236

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What is the present value of the CCA tax shields generated if a company purchases equipment...
What is the present value of the CCA tax shields generated if a company purchases equipment to be used in business operations for $380,000 and the equipment has a CCA rate of 30 percent? You intend to sell the equipment in year 8 for a salvage value of $8,000. The tax rate is 35 percent and the company uses a 10 percent discount rate. Select one: a. $92,537 b. $95,216 c. $91,273 d. $93,777 e. $94,236
Compute the PV of the CCA Tax Shield given the following: Purchase Price of New Equipment...
Compute the PV of the CCA Tax Shield given the following: Purchase Price of New Equipment = $60,000 CCA Rate for Equipment = 30% Salvage Value of Equipment Received in 5 Years = $18,000 (not Present Value) Required Rate of Return = 7% Corporate Tax Rate = 30%
Compute the present value of interest tax shields generated by these three debt issues. Consider corporate...
Compute the present value of interest tax shields generated by these three debt issues. Consider corporate taxes only. The marginal tax rate is Tc = .40. a. A $2,400, one-year loan at 7%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value            $ b. A three-year loan of $2,400 at 7%. Assume no principal is repaid until maturity. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value            $ c. A...
Depreciation Tax Shields Lincoln Company has purchased equipment for $200,000. After it is fully depreciated, the...
Depreciation Tax Shields Lincoln Company has purchased equipment for $200,000. After it is fully depreciated, the equipment will have no salvage value. Lincoln may select either of the following depreciation schedules for tax purposes: Option 1 Option 2 Year Depreciation Depreciation 1 $40,000 $20,000 2 64,000 40,000 3 38,400 40,000 4 23,040 40,000 5 23,040 40,000 6 11,520 20,000 Assuming a 40% tax rate and a 12% desired annual return, compute the total present value of the tax savings provided...
Depreciation Tax Shields Lincoln Company has purchased equipment for $500,000. After it is fully depreciated, the...
Depreciation Tax Shields Lincoln Company has purchased equipment for $500,000. After it is fully depreciated, the equipment will have no salvage value. Lincoln may select either of the following depreciation schedules for tax purposes: Option 1 Option 2 Year Depreciation Depreciation 1 $100,000 $50,000 2 160,000 100,000 3 96,000 100,000 4 57,600 100,000 5 57,600 100,000 6 28,800 50,000 Assuming a 40% tax rate and a 12% desired annual return, compute the total present value of the tax savings provided...
You purchase a machine for $210,000 which belongs in a 30% CCA class. What is the...
You purchase a machine for $210,000 which belongs in a 30% CCA class. What is the present value of the CCA tax shield on the machine if it is sold at the end of the sixth year for $24,000, your tax rate is 35%, and the appropriate discount rate is 10%?
Larry's bridal company has purchased a manufacturing equipment costing $75,300. The equipment has a three-year useful...
Larry's bridal company has purchased a manufacturing equipment costing $75,300. The equipment has a three-year useful life with a salvage value of $30,500. CCA will be taken using a rate of 30%. The tax rate is 26.00%, while the discount rate is 7.50%. Assuming the company takes all available CCA every year, what will be the amount of taxes Larry has saved due to CCA in year 2? A) 4992 B)5117 C)5242 D5367 E)5492 F)5276
Alpha Corporation has just invested $1,200,000 in new equipment which has a useful life of 6...
Alpha Corporation has just invested $1,200,000 in new equipment which has a useful life of 6 years and a salvage value of $200,000. The Corporation has a tax rate of 40% and the equipment falls into a 30% CCA class and the half-year rule applies. The new equipment would result in annual pre-tax savings of $350,000 in each of the 6 years starting in Year 1. The equipment requires an investment in working capital of $60,000 at t=0 which is...
A company is purchasing a new equipment in Class 8 (20% CCA rate -- declining balance...
A company is purchasing a new equipment in Class 8 (20% CCA rate -- declining balance class, half year rule applicable) in 2019 for $30,000. The machine is expected to result in annual revenue of $14,000 for each of the next five years and will be sold at the end of that time for an expected salvage value of $12,000. Maintenance expenses are expected to be $1,400 for the first year and to increase by $200 per year for each...
A company is considering a project which will require the purchase of $805,000 in new equipment....
A company is considering a project which will require the purchase of $805,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $292,000. Initial net working capital equal to 36.50% of sales will be required. All of the net working capital will be recovered at the end of the project....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT