Example: DuoCity Taxi is considering expanding its fleet.

nThe cost of the new taxis is $1,000,000 now.

nTaxis fall under CCA Class 16 and are allowed a CCA rate of 40%.

nDuoCitys tax rate is 45% and the relevant opportunity cost of capital is 15%.

nAssume the taxis relevant to this project will be sold at the beginning of the 6th year for $100,000.

nThe project will generate revenues in excess of expenditures of $450,000 per year for 5 years.

nThe project will also require an immediate working capital increase of $50,000, no intermediate changes, and a reversion to normal working capital requirements at the end of 5 years.

Year	CCA	CCA tax shield	Ending UCCt = Beginning UCC t+1
1
2
3
4
5