Spherical Manufacturing recently spent $ $16$ million to purchase some equipment used in the manufacture of disk drives. This equipment has a CCA rate of $25\%$ and$$ Spherical's marginal corporate tax rate is $29\%.$

a$.$ What are the annual CCA deductions associated with this equipment for the first five$$ years?

b$.$ What are the annual CCA tax shields for the first five$$ years?

c$.$ What is the present value of the first five CCA tax shields if the appropriate discount rate is $8\%$ per$$ year?

d$.$ What is the present value of all the CCA tax shields assuming the equiment is never sold and the appropriate discount rate is $8\%$ per$$ year?

e$.$ How might your answer to part$($d$)$ change if Spherical anticipates that its marginal corporate tax rate will increase substantially over the next five$$ years?

Question content area bottom

Part $1$

a$.$ What are the annual CCA deductions associated with this equipment for the first five$$ years?

The CCA deduction for year $1$ is $$$

$$

enter your response here. $($Round to the nearest$$ dollar.$)$