Note CCA taxes rate is half on the first year

10. After starting a new job, you discover that although unusual for an oil and gas company, your company owns six taxis, 17 original Pac-Man arcade machines, and three freight trucks acquired after December 6th 1991 that are rated above 11,788 kg, all of which has a total current book value of $175,000. A little suspiciously but conveniently, all of these items are Class 16 assets, which use a CCA rate of 40%. Your company has annual operating revenues of $600,000, operating costs of $250,000, and is currently paying $20,000 a year in interest on a loan, with the capital of the loan to be repaid to the bank in full 5 years from now. Looking into the future, the company plans to sell the arcade machines in year 2, for a total sum of $15,000, and plans to buy two more taxis in year 3, for a total price of $30,000. Assume that all Canadian laws apply and that your company has a tax rate of 32%. a) [10 marks] Calculate the book value and claimable depreciation of this asset class for each of the next 3 years. b) [8 marks] Calculate the taxable income, net profit, BTCF and ATCF for year 3. Taxes and Cash Flows: Taxable income O Net profit = taxable income( 1-T) Before-tax cash flow (BTCF) I+CCA +taxable income After-tax cash flow (ATCF) = Net profit + CCA + I-Net Salvage (NS) R -OC-CCA -I - (Taxable income)(1-T) CCA +I+NS = (BTCF-I-CCA)(1-T) + CCA + 1 + NS (OR - OC)1 -T) +I(T) + CCA(T) + NS Net cash flow from operations = ATCF-1-DIV Net Salvage S - Tax adjustment (Recaptured depreciation or loss times tax rate) - Capital Gains(T) OR operating revenue; oc- operating cost