ABC Inc. is considering the purchase of a new machine for $$150,000,$ installed. This machine is included in CCA class $8(20\%).$ The firm expects to the machine to have a salvage value of zero after six years. Determine the present value of the CCA tax shield if the firm' s marginal tax rate is $25\%,$ its weighted average cost of capital $($WACC$)$ is $8\%$ and the firm has other equipment in the asset class. Assume that the half$-$year rule applies.

Question $1$Answer

a$.$

$$19,090\mathrm{.}91$

b$.$

$$25,793\mathrm{.}65$

c$.$

$$26,785\mathrm{.}71$

d$.$

$$16,049\mathrm{.}38$