Jambo & Sons, Ltd. purchases equipment to be used in business operations for $23,000. The equipment has a CCA rate of 20%. They intend to sell the equipment in year 10 for a salvage value of $5,000. At the time of sale, they still anticipate having other assets in the class. Tax rate is 34%. The company uses a 9% rate of return. Determine the present value of the incremental tax shields generated. a. $5,393.10 b. $5,665.69 c. $4,675.21 d. $5,170.45 e. $4,400.20

Jambo & Sons, Ltd. purchases equipment to be used in business operations for $23,000. The equipment has a CCA rate of 20%. They intend to sell the equipment in year 10 for a salvage value of $5,000. At the time of sale, they still anticipate having other assets in the class. Tax rate is 34%. The company uses a 9% rate of return. Determine the present value of the incremental tax shields generated. a. $5,393.10 b. $5,665.69 c. $4,675.21 d. $5,170.45 e. $4,400.20

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 11P

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