Louie's Leisure Products Is Considering a 7 Year Project Which

question 96

Multiple Choice

Louie's Leisure Products is considering a 7 year project which will require the purchase of $1.4 million in new equipment. The equipment belongs in a 20% CCA class. Louie's expects to sell the equipment at the end of the project for 20% of its original cost. Annual sales from this project are estimated at $1.2 million. Net working capital equal to 20% of sales will be required to support the project. All of the net working capital will be recouped at the end of the project. The firm desires a minimal 14% rate of return on this project. The tax rate is 34%.

What is the present value of the CCA tax shield for this project?

• A) $34,299
• B) $68,047
• C) $132,493
• D) $200,782
• E) $240,427

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Definitions:

Ineffective Airway Clearance

A state where an individual has difficulty removing respiratory secretions or obstructions from the airway to maintain airway patency.

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Thick Sputum

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Flu Vaccination

A preventative healthcare measure aimed at protecting individuals from the influenza virus through the administration of a vaccine.