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Companies invest in expansion projects with the expectation of increasing the earnings of their businesses. Consider another company, Able Manufacturing Corporation (AMC). AMC is proceeding
Companies invest in expansion projects with the expectation of increasing the earnings of their businesses. Consider another company, Able Manufacturing Corporation (AMC). AMC is proceeding with a new expansion project that is anticipated to have a four-year life span. The project calls for the purchase of equipment for $2 million and manufacturing assets valued at $1.5 illion. Able Manufacturing's corporate tax rate is 30%, and its discount rate is 10%. Upon completion of the project, the company expects the salvage values to become $1.5 million and $1 million, respectively. The capital cost allowance (CCA) rate for the asset classes as given by Canada Revenue Agency (CRA) are buildings, 496, equipment, 2090, and manufacturing assets, 30%. Calculate the present value for the total tax shield. $326,675 $168,481 $345,395 $174,915
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