Question
Your company is considering a project which will require the purchase of $705,000 in new equipment.The company expects to sell the equipment at the end
Your company is considering a project which will require the purchase of $705,000 in new equipment.The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class.Annual sales from this project are estimated at $252,000.Initial net working capital equal to 31.50% of sales will be required.All of the net working capital will be recovered at the end of the project. The firm requires a 9.75% return on similar investments.The tax rate is 35%, and the project life is 5 years.There are no other operating expenses.If the equipment is in a 32.00% CCA class, what is the present value of the CCA tax shield?
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