Question
1.ABC Products needs to replace its rawhide tanning and molding equipment. It can be used for five years and will have no salvage value. The
1.ABC Products needs to replace its rawhide tanning and molding equipment. It can be used for five years and will have no salvage value. The equipment costs $930,000. The firm can lease it for $245,000 a year, or it can borrow the money to purchase the equipment at 8%. The firm's tax rate is 34%. The CCA rate is 20% (Class 8).What is the present value of the depreciation tax shield?
Select one:
a. $277,177
b. $186,000
c. $236,959
d. $26,876
e. $243,885
2.
Suppose a project costs $375 and produces cash flows of $100 over each of the following seven years. What is the IRR of the project?
Select one:
a. There is not enough information; a discount rate is required
b. 18.6%
c. 10.0%
d. 13.0%
e. 15.3%
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