Question
Your firm is considering a new project. The project would last for 6 years. Your firm would have to purchase a new piece of equipment.
Your firm is considering a new project. The project would last for 6 years. Your firm would have to purchase a new piece of equipment. The equipment costs $1,980,000. The equipment could be sold at the end of the project for $575,000. The project would generate revenues of $1,300,000 per year and it would have operating costs of $790,000 per year. The company would have to invest $444,000 in operating net working capital initially. Operating net working capital would remain at this level throughout the life of the project. The project's required rate of return is 8.5%. The tax rate is 25.5%. The CCA rate is 28%. What is the present value of the cca tax shield?
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