Spherical Manufacturing recently spent $20 million to purchase some equipment used in the manufacture of disk brakes. This equipment has a CCA rate of 25% and $ Sphericar's marpinal corporate tax rate is 30%. a. What are the annual CCA doductions 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 12% per year? d. What is the present value of at the CCA tax shields assuming the equiment is nover sold and the appropriate discount rate is 12% per yoan e. How might your answer to part (d) change if Spherical anticipates that its marginal corporate tax rabe will increase substantially over the pext five years? a. What are the annual CCA deductions associated with this equipment for the first five years? The CCA deduction for year 1 is 5 (Round to the nearest dollar) The CCA deduction for year 2 is $ (Round to the nearest dollar) The CCA deduction for year 3 is $ (Round to the nearest dollar) The cCA detuction for your 4 is 5 (Round to the nemest doliar) The cCA deduction for year 5 in 5 (Round to the nearest dollar.) b. What are the annual CCA tax snelts for the first fire yoars? The CCA tax shield for year 1 is 3 (Round to the nearest dollar) The CCA tax shield for year 2 is $ (Round to the nearest dollar) The CCA tex sheld for year 3 is 1 (Round to the nearest dollar) The CCA tax shield for year 4 is $ (Round to the narest dolar) The CCA tax shield for year 3 is 5 (Round to the nearest dollar.) The CCA tax shilold for yoar 4 is $ (Round to the nearest doltar) The CCA tax shiold for year 5 is $ (Round to the nearest dollar) e. What is the present value of the frst five CCA tax shields if the appropriate discount rate is 12% per year? The present value of the first five CCA tax shields is $ (Round to the nearest dollar) d. What is the present value of all the CCA tax shelds assuming the equiment is never sold and the appropriate discount rate is 12% per year? The present value of all the CCA tax shields is 5 (Round to the nearest dollar.) e. How might your answer to part (d) change if Spherical anticipates that its marginal corporate tax rate will increase subetantially over the next five years? (Select the best cheice below) A. If the marginal corporate tax rate increases over the next five years, the PV of the CCA tax shields wil be higher than what is calcilated in part (d). B. If the marginal corporate tax rate increases over the next five years, the PV of the CCA tax shields wil be lower than what is calculated in part (d). C. If the marpinal corporate tax rate increases over the next five years, the PV of the CCA tax shields wil be the same as what is calculated in part (d)
