Question
Acadia Construction Company is a new business that is considering its first project. The required equipment investment by the company is $50,000 (CCA class 39)
Acadia Construction Company is a new business that is considering its first project. The required equipment investment by the company is $50,000 (CCA class 39) with an expected revenue of $20,000 in year 1, increasing by 5%/year for the 5-year life of the project. Costs in year 1 are expected to be $5000, increasing by 3%/year for the 5-year life of the project. The salvage value of the equipment at the end of the five years is $5000 and the tax rate is 40%. a) What is the NPW of the project and the IRR if the MARR is 15%? b) Because the company is a new company, it may be eligible to enjoy a reduced tax rate over the life of the project. If Acadia Construction Company wants to earn a 15% on their project, what would the reduced tax rate have to be?
Show all working, try not to use excel
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