Company ABC is a clothing manufacturer and is considering buying a new manufacturing machine to produce a new line of disposable hospital gowns. The machine has an estimated life of 3 years and costs $30,000. The machine falls under asset class 43 and has a capital cost at 30%. At the end of 3 years the machine will be scrapped as it will have a zero value. The tax rate for company ABC is 35%. ABC has a cost of capital of 10% The Present Value of the CCA Tax Shield is: $30,000 $3,150 $7,875 $7,517 Question 6 Company XYZ will invest in a 3-year project that will result in sales of 4,000 items in year 1 , at a selling price of $12 each, and a cost $8.40 each. The number of items sold is estimated to grow by 10% per year. The per unit selling price and cost will remain unchanged over the the the 35%. A machine for the project will cost $40,000. The present value of the CCA tax shield on the machine is $6,084. The production of this new product line will result in additional working capital balances at the end of each year as follows: - Year 0: Zero balance - Year 1: \$2,160 - Year 2: \$2,333 - Year 3: Zero balance The NPV of this project is: $5,449 $4,324 $1,760 $8,743 Company ABC is a clothing manufacturer and is considering buying a new manufacturing machine to produce a new line of disposable hospital gowns. The machine has an estimated life of 3 years and costs $30,000. The machine falls under asset class 43 and has a capital cost at 30%. At the end of 3 years the machine will be scrapped as it will have a zero value. The tax rate for company ABC is 35%. ABC has a cost of capital of 10% The Present Value of the CCA Tax Shield is: $30,000 $3,150 $7,875 $7,517 Question 6 Company XYZ will invest in a 3-year project that will result in sales of 4,000 items in year 1 , at a selling price of $12 each, and a cost $8.40 each. The number of items sold is estimated to grow by 10% per year. The per unit selling price and cost will remain unchanged over the the the 35%. A machine for the project will cost $40,000. The present value of the CCA tax shield on the machine is $6,084. The production of this new product line will result in additional working capital balances at the end of each year as follows: - Year 0: Zero balance - Year 1: \$2,160 - Year 2: \$2,333 - Year 3: Zero balance The NPV of this project is: $5,449 $4,324 $1,760 $8,743