You firm just bought a new machine. The machine cost $1,800,000. The machine will be operated for 4 years. It will then be sold for its salvage value of $100,000. The CCA rate is 22%. The tax rate is 34%. The required rate of return is 9% compounded annually. The asset class will remain open. What is the present value of the CCA tax shield? Assume the half-year rule is in effect. Your answer should be accurate to two decimal places. Your Answer:

You firm just bought a new machine. The machine cost $1,800,000. The machine will be operated for 4 years. It will then be sold for its salvage value of $100,000. The CCA rate is 22%. The tax rate is 34%. The required rate of return is 9% compounded annually. The asset class will remain open. What is the present value of the CCA tax shield? Assume the half-year rule is in effect. Your answer should be accurate to two decimal places. Your Answer:

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 2P

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