Cost Cutting: CBD Inc, a processor of CBD oils, is analyzing a potential opportunity to cut costs. It can spend $1,500,000 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 20% return. Should they undertake this cost-cutting program?

What is the correct value for Step #2?

+$1,124,523

+$931,143

+$985,268

+$1,059,655

+$1,097,511

What is the correct value for Step #3?

+$273,913

+$266,122

+$284,664

+$243,750

+$250,250

What is the correct value for Step #4?

+$94,123

+$101,875

+$108,082

+$89,332

+$83,724

What is the correct value for Step #5?

-$12,559

-$13,447

-$16,221

-$17,889

-$18,528