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McKernan Inc. is considering the purchase of a new machine for $50,000, installed. This machine is included in CCA class 8 (20%). McKernan Inc. expects

McKernan Inc. is considering the purchase of a new machine for $50,000, installed. This machine is included in CCA class 8 (20%). McKernan Inc. expects to sell the machine at the end of its 4-year operating life for $10,000. Determine the present value of the CCA tax shield if McKernans marginal tax rate is 40%, its weighted average cost of capital (WACC) is 10% and McKernan has other equipment in the asset class.

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