Question
is evaluating the acquisition of a new airplane. Its price is $45,000, it qualifies for a government grant to reduce its capital cost by $2,400.
is evaluating the acquisition of a new airplane. Its price is $45,000, it qualifies for a government grant to reduce its capital cost by $2,400. It will be in CCA class 9 (25%). Purchase of the new plane would require an increase in net working capital by $1,500; before-tax revenues by $20,000 per year and operating costs by $5,000 per year. The plane will be used for 3 years and then be sold for $25,000. The firm's marginal tax rate is 25%, and the project's cost of capital is 14%.
REQURIED: COMPLETE THE FOLLOWING TABLE (Round all answers to the nearest dollar)
Year 0 Year 1 Year 2 Year 3
Purchase Price
-45000
Working Capital
Net Revenue
Salvage Value
CCA Tax Shield
Lost Tax Shield
Totals
PV of Cashflows
NPV
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