Question
CBD Inc, a processor of CBD oils, is analyzing a potential opportunity to cut costs. It can spend $1.5 Million today on the purchase and
CBD Inc, a processor of CBD oils, is analyzing a potential opportunity to cut costs. It can spend $1.5 Million today on the purchase and installation of a new automated processing line. The equipment will have a six-year life, at which time it can be sold for $250,000. The equipment qualifies as a Class 8 asset with a 20% CCA rate. Since the equipment will be purchased in 2020, it is subject to the Accelerated Investment Incentive rules, rather than the half-year rule. The benefit of installing the new equipment is a reduction in labor costs of $400,000 per year. The new process will lead to an immediate increase in Net Working Capital (NWC) of $25,000, which will be recovered at the conclusion of the project. The firm has a 30% corporate tax rate and it wants a 15% return. Should they undertake this cost-cutting program?
What is the correct value for Step #1?
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A) $250,000 B) $400,000 C) $1,500,000 D) $1,525,00
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What is the correct value for Step #2?
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A) $1,059,655 B) $1,135,950 C) $1,366,245 D) $1,263,755
What is the correct value for Step #3?
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$376,650
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$650,545
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$273,913
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$452,640
What is the correct value for Step #4?
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$108,082
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$123,690
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$85,631
-
$98,654
What is the correct value for Step #5?
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$20,635
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$16,412
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$18,528
-
$17,397
What is the correct value for Step #6?
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-$18,354
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$17,369
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-$15,648
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-$14,192
They're all easy subquestions, please answer all. Don't need to show work!
Same question for all of them
The step value is whether they should undertake the project by year end value
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