Simon Machine Tools Company is a manufacturing company located in London, Ontario. It is considering the purchase of a new grinding machine to process special orders. The following financial information is available. Without the project: The company expects to have a taxable income of $500,000 each year from the regular business over the next 3 years. With the project: The three-year project requires the purchase of a new grinder for $50,000. The equipment falls into CCA class 8. The grinder will be sold at the end of the project for $10,000. The project will bring in an additional revenue of $80,000 per year, but it is expected to incur additional annual operation cost of $20,000.

(a) Find the CAA and additional taxable incomes for year 1 to year 3. (CAA is 20%)

(b) Find the additional income taxes and net cash flow for year 1 to year 2.

(c) Compute the disposal tax effect at the end of year 3.

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