Jake's Auto Sales currently sells $3.4 million of new vehicles and $1.7 million of used vehicles a year. Jake is considering expanding his operations and adding an imported car to his lineup. Should he do this, he expects to sell $680,000 worth of imported cars per year. However, he also expects to lose about $450,000 of his upper end current sales. The expansion will necessitate spending $78,000 to add an additional showroom onto the current facility. What is the erosion cost associated with this expansion project? A. $230,000 B. $308,000 C. $372,000 D. $450,000 E. $528,000

Margarite's Enterprises is considering a new project. The project will require $325,000

for new fixed assets, $160,000 for additional inventory and $35,000 for additional accounts

receivable. Accounts payable is expected to increase by $100,000 and long-term debt is

expected to increase by $300,001. The project has a 5-year life. The fixed assets will belong

in a 30% CCA class. At the end of the project, the fixed assets can be sold for 25% of their

original cost. The net working capital returns to its original level at the end of the project. The

project is expected to generate annual sales of $554,000 and costs of $430,001. The tax rate is

35% and the required rate of return is 15%.

What is the present value of the CCA tax shield for this project?

A. $28,438

B. $37,918

C. $52,813

D. $61,462

E. $81,250