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A company is considering a 6-year project that is expected to generate annual before-tax cost savings of $700,000. The project would require an asset that
A company is considering a 6-year project that is expected to generate annual before-tax cost savings of $700,000. The project would require an asset that qualifies for a 20% CCA rate, has an installed cost of $2,000,000, and at the end of the 6 years is expected to have no salvage value. The project would require a $140,000 initial investment in net working capital. The company requires a 13% return. Assume a tax rate of 25%. What is the present value of the CCA tax shield?
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