A new machine costs $764,850 and falls in a 25.50% CCA class. The machine will have zero value after 5 years of use but will save $355,360 annually in operating costs before taxes in those five years. Assume a tax rate of 32.25%. Using a required return of 13.19%, what is the present value of the CCA tax shield? Options $137,790 $141,618 $145,445 $149,273 $153,100

EBK CONTEMPORARY FINANCIAL MANAGEMENT
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ISBN:9781337514835
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Chapter10: Capital Budgeting: Decision Criteria And Real Option
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A new machine costs $764,850 and falls in a 25.50% CCA class.  The machine will have zero value after 5 years of use but will save $355,360 annually in operating costs before taxes in those five years.  Assume a tax rate of 32.25%.  Using a required return of 13.19%, what is the present value of the CCA tax shield?

Options

 

$137,790

 

$141,618

 

$145,445

 

$149,273

 

$153,100

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