#11

Use the following to answer questions 10-11: Your firm is thinking about purchasing a new machine. The new machine would cost $4,500,000 today. The new machine would operate for 4 years at which time it could be sold for $900,000. The CCA rate is 30%. The asset class will remain open. The new machine will generate revenues of $1,750,000 per year. The annual operating costs associated with the new machine are $1,100,000 per year. The corporate tax rate is 45%. The required rate of return is 9%. Version A Page 4 10. What is the present value of the salvage value for this investment? A) $286.912.21 B) $637.582.69 C) $779.267.73 D) $350.670.50 E) $414.556.84 11. What is the present value of the CCA tax shield? Be certain to include any necessary adjustments due to salvage value A) $1.272.682.21 B) $1.336.990.61 C) $1.493.383.91 D) S1.246.153 85