Question
A Canadian firm needs a computerized machine which costs $80,000 plus another $10,000 to install. The companys VP of Sales believes that the machine will
A Canadian firm needs a computerized machine which costs $80,000 plus another $10,000 to install. The companys VP of Sales believes that the machine will boost annual revenues by $250,000. The machine costs $20,000 to maintain for each year of its three year life. After three years, the salvage value will be $15,000. The machine falls into the Class 10 equipment category (CCA rate 30%). Assume a tax rate of 34% and a discount rate of 10%, the half-year rule applies. Further assume that the asset pool remains open after the end of the third year. 23. What is the present value of the CCA tax shield? + operating cash flow for year 2?
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