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
Answer #1
Not the answer you're looking for?
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%?
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...
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...
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
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.
ADVERTISEMENT
Active Questions
asked 2 minutes ago
asked 6 minutes ago
asked 13 minutes ago
asked 13 minutes ago
asked 14 minutes ago
asked 22 minutes ago
asked 35 minutes ago
asked 43 minutes ago
asked 54 minutes ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago